SurveyMonkey Holds Off On IPO

Industry research firm IBISWorld recently found that the online survey software industry grew 9.3% annually over the five-year period through 2011. The industry was estimated to be worth $2 billion in 2011. The researcher expects growth to continue. By 2016, the market is projected to be worth $3.1 billion, with an average annual growth rate of 9.6%.

SurveyMonkey’s Offerings

Survey builder SurveyMonkey was founded by software developer Ryan Finley in 1999. Finley bootstrapped the company for the first few years, running very tight operations and hiring the first employee only after three years of business. The company was founded to conduct an online survey. By 2008, they had reported revenues of $27 million on a headcount of 14 employees. Today SurveyMonkey is among the leading survey tools. Their online tools help organizations to collect more than 1.5 million online survey responses daily.

SurveyMonkey operates a freemium pricing model. Users can sign up on SurveyMonkey free to conduct online surveys with limited features. Free surveys are restricted to 10 questions and 100 responses per survey. For a premium subscription, consumers can get advanced features that include unlimited questions and responses, enhanced security, customer support from SurveyMonkey, and integration with statistical software such as SPSS for further analysis of results. Prices for paid subscriptions range from $17 per month to $65 per month. They have more than two million active users and their customer list includes more than 99% of the Fortune 500 players. The paid subscriber base is estimated to be more than 360,000 users who pay an average of $200-$300 annually.

Over the past few years, SurveyMonkey has seen strong growth. Last year, revenues grew more than 40% over the year to $113 million. Unlike most other online companies, SurveyMonkey has been turning a profit. EBITDA last year was $61 million.

SurveyMonkey has been funded through venture capitalists and loans. Last month, they raised funds of $800 million, of which $450 million was through equity investment from CEO Dave Goldberg, Tiger Global Management, and Google. The remaining $350 million was debt financed by JPMorgan Chase. This recent funding pegged the company’s valuation at $1.35 billion. In 2010, SurveyMonkey had received $100 million in debt financing from the Bank of America and SunTrust Robinson Humphreys. Back in 2009, SurveyMonkey had received $150 million in equity investment from Bain Capital and Spectrum Equity Investors. These early investors sold off some of their stake to the new investors last month.

SurveyMonkey’s Growth Plans

Analysts were expecting SurveyMonkey to file for an IPO this year. But the recent influx of funds suggests that the company may be waiting. SurveyMonkey’s management claims that the business is sufficiently profitable and does not need funds to support operations. Instead, they will use the new funds to grow through acquisitions, international expansion and product development. Over the past year, SurveyMonkey has added 14 languages to their survey tools. Their systems now accept payments in 29 currencies.

It seems to me like a wise plan to wait and build muscle without the scrutiny of the public market.