Denver is getting a growing company’s headquarters later this year — a company that’s preparing for the area’s next big tech IPO.
SendGrid Inc., which manages thousands of online companies’ emails, plans to consolidate its three Colorado offices at 1801 California — the former Qwest tower — in downtown Denver.
It is moving 60 employees from its Boulder headquarters, and more than 120 workers from two Denver offices, into a single location with room to grow into a much larger business.
The move is part of a larger effort to expand, as well as prepare SendGrid to go public next year, Yancey Spruill, SendGrid’s COO and CFO, told me.
Going public in 2017 isn’t guaranteed, he said, but SendGrid is planning for it to maximize the company’s value as it goes from a nearly 300-employee business into one with several hundred workers.
“Having the ability to be a publicly-traded company means we’re building a great business for the long haul,” he said. “When you don’t even have an IPO as an opportunity, that means there’s a shortfall in the business in some way, and you have reduced options.”
Solving email problems
SendGrid made a name for itself solving email delivery problems for growing companies such as Airbnb and Uber, which rely on automated email replies to customers.
The company grew out of the 2009 Techstars startup boot camp in Boulder. Techstars CEO David Cohen and Brad Feld, the Foundry Group venture capitalist, called it one of the more exciting startups they’d seen, given the problem SendGrid technology solved for an emerging generation of companies.
Today, SendGrid has offices in Redwood City, where CEO Sameer Dholakia is based, and in Orange, California, near where SendGrid’s founders are from, as well its main workforce in Colorado. It counts 40,000 businesses as paying customers, companies large and small, Spruill said.
SendGrid’s generating tens of millions of dollars in annual revenue now and growing by more than 30 percent per-year with profitability near, Spruill said.
“We’re serving a lot of emails — a billion emails a day on many days — with a lot of room to grow,” he said. “Every company that has an online presence that signs up customers in some fashion has some sort of transactional email. Our market is vast.”
SendGrid should be the size of company ready to go public by next year, Spruill said.
Doing so would give its private investors a way to cash out, give employees a way to cash in stock options, and provide SendGrid access to public-market capital that could be used for acquisitions or other growth. Plus, being public adds credibility with potential customers, Spruill said.
The company’s growth and place in the tech world makes it a great story for potential investors, he said.
Few tech IPOs
The Denver metro area has had few tech-industry IPOs in the past decade.
Boulder-based Zayo Group Holdings Inc. (NYSE: ZAYO), a fiber-optic network and data infrastructure company, successfully went public in late 2014. Prior to that, Boulder’s Rally Software Development Corp. went public in 2013, the first significant local software company to do so in 13 years.
Spruill became a board member of the newly public Rally Software, which was later acquired by software giant CA. For the previous decade, he’d been CFO of Westminster-based DigitalGlobe Inc., a satellite imagery company that went public in spring 2009.
DigitalGlobe (NYSE: DGI) first filed for its IPO in early 2008 and waited nearly 18 months to see its stock trade. The U.S. economy tumbled into the Great Recession and the stock market collapsed in the meantime.
DigitalGlobe became the fourth U.S IPO after the crash as the stock market tried to regain confidence.
No major tech IPOs have occurred in the U.S. so far in 2016, and most tech IPOs last year struggled. That’s led to a lot of speculation investors have gone cold on the new generation of tech businesses.
Spruill, with his experience at DigitalGlobe and years of previous investment banking experience, doesn’t see it that way.
“You can always raise capital for companies that have good ideas and plans, good processes and good market execution. It’s absolutely do-able,” he said. “The timing of the VC cycle after the last downturn and what’s happened with the capital market is you’re just seeing people delay because they have alternatives in the private market and they’re getting their business models, the infrastructure and the robustness [of their business] right.”
Doing an IPO right
Spruill said that to do an IPO, a company has to make sure it’s got the right business model and is maximizing its opportunities; it needs processes and people in place to be a growing, profitable and increasingly complex company; investors must be on board; and the market conditions must make sense, he said.
SendGrid has been working on the first two areas intensely, while keeping it an enjoyable place for employees to work productively, Spruill said.
That involves building processes for communicating the performance of the business and getting more people involved in decision-making, he said.
It also helps the business know how it’s performing and address problems before they impact the bottom line, which is crucial for the regular scrutiny from investors and regulators a public company faces, he said.
“When you’re a startup, you need very little process because you can get together around the ping pong table and do a bunch of work and talk,” he said. “When you’re where we are — pushing against 300 employees with a plan to be several hundred in the next few years — you need to create processes and layers of the leadership that go beyond the executives and empowers people to own more of the company’s operating foot print.”
That requires the rest of the company to be able to keep performing well, making sales, developing new products and serving existing clients without the C-level executives having to be involved, Spruill said.
Consolidated headquarters in Denver is an important part of becoming that larger, more complex business, he said.
There’s a larger population of skilled people to hire from, and Colorado employees in one location should remove unneeded friction of being spread across three local sites, Spruill said.
“This is about creating a culture that minimizes the barriers to productivity and engagement,” he said. “We’re doing it now, and we’re very successful. We have a pathway to be profitable, we’re growing, we’re launching new products and we’re doing well as a business. But we could do better.”