Spectrum Equity bought the no-longer-a-startup for $63 million.

Techland, like most places, likes stories with extreme outcomes: Startup X sells for a gazillion dollars; Startup Y, once valued at a gazillion dollars, goes to zero.

So here’s a story that won’t get much attention: A modest success for a company that once had much grander aspirations.

That would be Bitly, a company that lets marketers and other businesses keep tabs on customers as they move around the web by generating short, trackable URL links.

Spectrum Equity just bought a majority stake in the nine-year-old company for $63 million. A press release doesn’t spell out the specifics but I’m told Spectrum now owns a significant majority of Bitly, and that the new deal values the company below the $100 million valuation of its last raise, back in 2012.

In other words, maybe the investors who put a reported $29 million into Bitly prior to the Spectrum deal got their money back. But they certainly didn’t make much on this.

Salt on the wound: There was a time, back in the early days of Twitter, that Bitly and its investors thought they had something really, really big on their hands.

Twitter was just ramping up, and Twitter used Bitly to shorten all the links its users generated, and that meant Bitly knew a ton about the way the internet worked — who clicked on what, when, where. Billions of times a month. Certainly that would be a huge data play, someday.

Then Twitter decided it would roll out its own link shortener, and Bitly’s ability to make money from the data it was generating never materialized. Most of Bitly’s attention was focused on its free product, and the money it made selling a premium version to publishers and marketers didn’t cover its costs.

If things continued on that trajectory, Spectrum wouldn’t be buying Bitly today — it would likely have quietly gone to zero. Instead, the private equity investor is buying a company with real revenue, and profits.

Credit a pivot, which started when CEO Mark Josephson joined the company in 2013.

“When I joined in we had two salespeople, three account managers and no marketing team,” he says today. “And the free product was better than the paid product. And we were burning cash.”

Josephson’s plan was to invert the company. He wanted to focus almost exclusively on Bitly’s paid product, pitched to enterprise customers.

Commence the long slog: Over four years, Josephson has swapped out all but three of the 45 employees who were at Bitly when he joined, and added another 30.

Now, he says, Bitly has more than 1,000 customers, paying an average of $1,000 a month: That’s more than $12 million in annual revenue, and Josephson says the company is able to make a profit on that.

Some of Spectrum’s money will go to buying out earlier investors. The remainder will help Bitly expand its sales team and give it capital for acquisitions, says Josephson, who is staying on.


Recode – All Go to Source
Author: Peter Kafka

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