The Tough Side of Being Venture Backed: ActOn Sells for $53m After 17 Years … And Raising ~$53m+

So a lot of folks somehow think venture capital is bad, that it throws founders under the bus.  I used to sort of think that way.  But the reality is, VCs only make real money if founders make a ton of money.  That’s just how investing work.

But what is 100% true is if you raise more than a few million in venture capital, especially more than $10m … you have to deliver.  The stakes go way up.  And I don’t see enough founders take that seriously today.

Let’s use ActOn as a case study.  Those of you new to SaaS may never have heard of them, but back in the day, they were a top competitor to HubSpot, Marketo and what’s now Salesforce Marketing (previously Pardot).

And after 17 long years, and raising $53m+  they got to $26m ARR … a long road to get there … and finally sold to a SPAC competitor.

For a nominal $53m.  A bit less than 1x what they raised, and maybe 2x ARR.  And it’s worse, as only $20m is cash.

So who makes what here?

So what likely happens here:

• All investors lose money
• Some of the later investors get 10%-20% of their investment back as cash, and some as stock in a SPAC that may or may not be worth much
• Earliest investors likely make nothing or close (due to liquidation preference)
• Employees make nothing
• Founders make nothing
• Management that is still here today gets some retention payments (otherwise, they would just leave)

Why does everyone lose here in a $53m sale?  Simple: they sold for less than they raised.  It’s that simple.

No, the VCs don’t get rich here.  The last round VCs get some cash back, and some sketchy stock.  Everyone else likely gets nothing.  No one wins.

So don’t let that be you.  If you are a rocketship, don’t worry.  HubSpot their #1 competitor is worth $30B+ today.  So raising $100m+ pre-IPO didn’t really matter.

But if you aren’t a rocketship, if you don’t bootstrap, then just raise a little outside capital.  Maybe just one round.

It keeps your options open. And it can turn a $53m sales into one that makes a few millionaires.  Instead of one into an outcome where no one makes much of anything.

More on this overall point here:

And a great example of a founder that raised about half as much, and it took about as long, but was careful to not spend it all … and ended up selling for almost $300m to Private Equity: