2018: Year In Review

Report

JAN 16, 2019 - Mark Macleod

2018 marked our third year at SurePath. It was another exciting year!

Deals

We closed 8 deals in 2018, up from 4 the prior year. In addition to the announced deals below we did a secondary for a large SMB POS player, a raise for a vertical marketplace and an exit in the home services space that will be announced soon.

The aggregate deal value in 2018 was 2.5x over 2017, reflecting the continued evolution of our firm, and a frothy investor market. All of our 2018 raises were competitive and oversubscribed.

Twice in 2018 we set an internal record for largest fundraising transaction. We broke that record again in the first week of 2019, with the closing of a growth round for Vena Solutions.

Time between closings is a key metric that we track internally. Our median time between closings in 2018 was 31 days. There’s only so long you can go without champagne!

Continuing our Strategy of Specialization

Strategy is ultimately about choices and focus. In the second half of 2016 we decided to focus on the SMB software market. We have a simple goal as a firm: To be the leading boutique investment bank in the SMB software market globally. The one call CEOs and boards in the space make when they need to make something happen.

We are still in the early innings, but this statement, which felt like a pipe dream at the start, feels more and more real. We have regularly been selected over much larger firms with far more deals closed. We have been chosen because we understand the companies and market better than others.

Stay tuned for some announcements in 2019 as we double down on our thought leadership in SMB.

New Buy-side Practice

For well over a year, we have had buyers asking us if we did work for buyers or if we only served sellers. The puritan in me thought that serving buyers would be some kind of conflict. However, in 2018, we listened to the market and added buy-side services to our menu. We track all the companies in SMB software anyway, so it was natural to help clients leverage that coverage to fuel their acquisition programs.

We believe that this helps us better serve our sell side clients as we have deeper relationships and insights into the buy side.

The SurePath SMB Index

The back half of 2018 was a pretty difficult time for all stock markets. Fears of Trump, Brexit, slow downs in China and never-ending questions on when this Bull market will end have dragged all indices down. Tech in particular has suffered the most, which makes sense given how richly valued the sector was.

While our index has not been immune to these swings, it remains above the other major indices. Companies that serve SMB are less prone to big contractions by enterprise customers or changing moods of consumers. They are better able to withstand the ups and downs of the market. And while big companies get all the headlines, the US economy is overwhelmingly an economy of entrepreneurs.

Parting observations

Coming from a SaaS background, I have quickly realized that investment banking is the opposite of SaaS. Deals close in lumps and close in varying shapes and sizes. We had two deals close on December 20, and did half our deal volume for the year in December.

To succeed in this business you need a strong stomach, strong balance sheet and a relentless focus on getting to the next close.

I mentioned earlier that the fundraising environment was frothy and that our rounds were oversubscribed There is, of course, a danger to taking on too much capital. It feels like success in the moment, but paper valuations at the time of a round are in some ways fiction. What matters is the actual valuation when the ultimate exit happens.

This is why we continue to beat the drum of optionality and ensuring our clients are always in a position to raise or achieve a profitable exit.

On a personal note, I feel a tremendous sense of gratitude that I get to this every day. A huge thanks to the team, our clients and the investors and buyers we have worked with this year.

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