Townsville-founded startup SafetyCulture has raised a massive $60.5 million, pushing its valuation to $1.3 billion and crowning it the latest Aussie unicorn.
The funding comes slap bang in the middle of the economic crisis caused by COVID-19, and about half of the money is being directed straight back to employees, who were given the chance to cash out on their vested equity.
The round was led by Aussie VC TDM Growth Partners. Blackbird Ventures, Index Ventures and Skip Capital, the VC fund headed up by Kim Jackson and her husband Atlassian co-founder Scott Farquhar, also took part.
Former Prime Minister Malcolm Turnbull also invested through the family office he runs with his wife Lucy.
Speaking to SmartCompany, SafetyCulture founder and chief Luke Anear says the entire purpose of the round was to offer long-term employees a chance to sell some of their stock.
Employees who have been with the company for three years or more were able to cash out.
“There are people who have been on this journey for eight years now,” he says.
“And we’re running in dog years. It’s a fast-paced environment.”
Companies are being held privately for longer and longer, the founder notes, with valuations skyrocketing, but equity all tied up.
As it stands, Anear has no plans to take SafetyCulture public.
“We get asked that question a lot,” he says.
The idea here was to create a liquidity event that didn’t involve an IPO, he says.
“That takes some of the pressure off of us to list.”
We’re not talking about small changes here. The dollar figures staff members have been able to access are “significant”, Anear says.
Of 375 employees, about 10% participated, he explains.
Those sales account for about half of the total funding amount.
“It’s life-changing amounts of money for people,” Anear says.
Some employees have been able to pay off their mortgages, he adds.
“We’re talking hundreds of thousands of dollars for people, or even millions in some cases.”
Of course, there is also a bit of cash left over for the business, which doesn’t go amiss, Anear says. It means the startup is cash-positive, he explains.
“We’ve made some pretty big changes over the past 18 months, from when we were burning up to $2.5 million a month,”
“By January this year, to reach profitability is a massive milestone.”
“We didn’t need additional funding, but it’s certainly great to take a bit more on board when you’re going through a period like this.”
Founded back in 2004, SafetyCulture is now raking in revenues “north of $50 million a year”, Anear says.
Generally, he aims for 80% to 100% year-on-year revenue growth, and the product is in use in 80 countries and in all kinds of industries, including healthcare, hospitality, transport and manufacturing.
Of course, with a valuation of over $1 billion, SafetyCulture now has the added accolade of being in the unicorn club. The Aussie one, at least.
But Anear doesn’t dwell on the label.
“It feels the same as it did yesterday,” he says.
“It’s nice to reach milestones, but I think the most important part of this for me is that we get to share some of the rewards for our effort with the team.”
For an early-stage startup employee, making big on your time investment is the dream outcome. But it’s not just for the staff members themselves. Anear says he wanted to show some appreciation for their families too.
“Working for a high-growth tech company is a family commitment. It’s not just the one employee; the whole family supports their lifestyle and the work that they do,” he says.
It’s impossible not to take note of the timing of this raise, announced right in the middle of Australia’s COVID-19-induced lockdown and the economic crisis that has come with it.
Anear says it’s been in the pipeline for a while — he had been thinking about making the move for about six months.
But, when it became clear strict social distancing rules were imminent, he ramped up efforts to get the signatures he needed.
“Normally, what usually would have taken weeks we did in a matter of hours over the course of one weekend,” he says.
“We rounded up signatures from 30 investors all over the world,” he adds.
“We worked through most of the night.”
Anear had to figure out how to get a printer to one investor who was on a mountain biking trip, he recalls. Malcolm and Lucy Turnbull signed their papers at 10.30pm on a Friday night.
“It’s fantastic to have that kind of support from our investors, and everybody pulled together to make that happen for our team.”
When asked whether he thinks he might have had a harder time pulling this off three months later, Anear takes a pause.
“Investors are watching the markets and waiting to see what the fallout will be from COVID-19,” he says.
“But there is always a place for great companies to find investment.”
As unstable as things may seem, this is a short- to mid-term event, he says. Typically, investors are in it for the long-term.
He also says it’s important to remember this is, first and foremost, a health crisis. The economic upheaval isn’t caused by a failing financial system.
“The underlying financial system is sound,” he says.
“Therefore, once we restore the health and the wellbeing of the community, then the financial system will recover quicker than past events.”
At the same time, the government’s stimulus packages are unprecedented.
A combination of all these factors should mean “the recovery will be sharper than previous downturns”, Anear says.
That’s not to say there won’t be negative effects. Even short-term impact “can be devastating for businesses”.
But, he suggests that the businesses that will survive are those that can adapt to the new, albeit temporary, way of the world.
“This is not survival of the fittest. This is survival of those that can adapt the best,” Anear says.
“As an entrepreneur, you need to be properly looking for the opportunities and understanding how people are adapting … and then build a business towards that,” he advises.
“Constraints and imperatives drive innovation. That has been a constant throughout time,” he adds.
“The constraints and the imperatives from COVID-19 will fuel a whole new generation of innovation.”