Hootsuite takes on debt to further expansion via M&A

Vancouver-based social media management company Hootsuite secures Debt financing

Here at Q1, we are big fans of Hootsuite, and we track the growth of the company routinely. (check out our articles on Hootsuite here, here, and here) During the summer months of 2017, one of our associates dedicated an ENTIRE infograph to Hootsuite detailing the road Hootsuite and how it achieved its unicorn status. (check it out, we think it’s pretty cool..)

Did we mention we really like Hootsuite? So, of course, we were happy to see that Hootsuite secured debt financing from CIBC.

On March 15th, 2018, Hootsuite announced that it received US$50M Debt financing from CIBC Innovation Banking, citing the specific need for a source of cash that was non-dilutive. Ryan Holmes, co-founder and CEO, says that “The Company is cash flow positive and the facility will primarily be reserved for M&A purposes.” This is Hootsuite’s second Debt financing since its founding in 2009, Hootsuite secured its first debt of US$3M in 2011.

Ryan further noted that “There is no associated valuation, however, our latest 409a is up from last year and growth is very strong”. For those unfamiliar, 409A is an appraisal of the fair market of a startup company, the valuation is used when a company is planning to offer stock options to its employees.

Secured funding to be used for further expansion

According to the official press release from Hootsuite, the funding will be used to expand business in Asia Pacific, Europe, and Latin America. This will focus on the verticalization of its current platform offerings for important industries such as financial services, insurance, government, and healthcare.

When Hootsuite raised money in 2014 it had already achieved unicorn status (1B+ in valuation). At that time Hootsuite referenced 10M users. According to its official release, Hootsuite now has 16M+ users and more than 80% of the Fortune 1000 companies as customers. Although one of its investors, Fidelity, publicly wrote down its investment in Hootsuite by 18% in January of 2016, we are feeling positive about the company’s growth and its general direction towards an eventual IPO. (here’s hoping!) While we are not privy to the terms of the financing, securing debt financing indicates that the company has passed the scrutiny of CIBC’s newly created Innovation Banking group and will be capable of repaying its interest and principal obligations.

Hootsuite positive about acquisitions

Hootsuite has been very acquisitive in the past, from 2011 through 2017 they have made 12 acquisitions. Last year specifically, they purchased AdEspresso and LiftMetrix. As per Ryan’s statement, the funding will be used for M&A purposes, suggesting that we may see more M&A activities from the Company.

CFO Greg Twinney further added that “This financing is a testament to the strong fundamentals behind Hootsuite and our ongoing commitment to global growth and innovation as the clear leader in social media management. The additional capital will help us scale even faster to bring the most innovative products and partnerships to market globally to help our customers strategically build their brands, businesses, and customer relationships with social.”

CIBC Innovation Banking

CIBC acquired Wellington Financial LP

The newly named entity CIBC Innovation Banking backed Hootsuite in the latest Debt Financing. In January of this year, CIBC acquired well known Toronto-based growth debt financing firm Wellington Financial LP in an effort to grow CIBC’s business in the technology sector.  We see three winners coming out of that acquisition: the Wellington Financial team who were able to monetize their hard work in building a North American powerhouse in the Venture Debt space and now have a broader debt product offering to increase market share; CIBC, whose “buy versus build” decision immediately strengthens their position against long established RBC Innovation Banking Group and Silicon Valley Bank’s renewed interest in Canada; and, Mr. Wonderful who will no longer have to undergo the candid, honest and persistent scrutiny of Mark McQueen’s entertaining and insightful blog and his Decade of Daddy Mirror Fund

The new entity focuses on startup or early stage debt, all the way to late or mature stage debt. Former CEO of Wellington Mark McQueen now heads CIBC Innovation Banking as President and Executive Managing Director Mark Usher, who was a partner at Wellington is now Managing Director & North American Market Leader.

Both Marks and the team at Wellington are no strangers to tech-savvy companies. Since its inception in 2000, Wellington has backed a large number of technology companies either with venture debt or equity. To name a few, US$14M to Dejero Labs in early 2017; $US14.3M Debt Financing to Metamarkets in 2014, who was later acquired by Snap Inc. in 2017; and also C$16M Debt financing to Vision Critical in 2014.

Belated congratulations to our friend Mark Usher and the rest of the team at CIBC Innovation Banking, we look forward to seeing more activities from this team now that they are backed by more firepower than ever!

Source: Techcrunch, Hootsuite, FinancialPost, CIBC Innovation Banking, Crunchbase