https://www.forbes.com/sites/alexkonrad/2021/03/08/zapier-bootstraps-to-5-billion-valuation/

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Editors' Pick|Mar 8, 2021,04:55pm EST|

Zapier's CEO Reveals How His Automation Startup Reached A $5 Billion
Valuation Without Jumping On The VC 'Hamster Wheel'

Alex Konrad
Alex KonradForbes Staff
Venture Capital
Covering venture capital, software and startups

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Zapier cofounders Mike Knoop (left), Bryan Helmig (center) and CEO
Wade Foster (right)

Zapier cofounders Mike Knoop (left), Bryan Helmig (center) and CEO
Wade Foster (right) didn't ... [+] participate in a recent secondary
sale.

Zapier

Zapier CEO Wade Foster avoids thinking about fundraising as much as
possible. Profitable for years, his startup, which provides
automation tools that connect apps together, gets plenty of interest
from venture capitalists. Foster prefers thinking about his
customers, he says: museum tour guides, Etsy sellers and coffee shop
owners who don't have time to follow the latest buzzword on tech
twitter, or whom VCs have anointed the next big thing.

"If you interviewed them and said, 'do you think you're a no code
expert,'" says Foster, invoking one such funding magnet term, no code
software, "they would probably be like, 'I don't know what you're
talking about.'"

But just because Zapier hasn't played the game -- raising just $1.3
million in funding, going fully remote long before the pandemic made
it commonplace, and targeting a customer set left overlooked by many
software companies -- doesn't mean it hasn't built a big business.
Last summer, Zapier reached $100 million in annualized recurring
revenue; it's passed $140 million by now. And in January, investors
found a way into the business, just not through Foster. Sequoia and
Steadfast Financial bought shares at a $5 billion valuation from some
of Zapier's original investors.

The Information published first word of the round in a January report
. Details of the raise were first reported in Forbes' Midas Touch
newsletter on Sunday.

Speaking about it for the first time, Foster says the transaction
took some pressure off the company founded in 2012 to pursue a
liquidity-creating event like an IPO or sale just yet. (The amount
sold and sellers were not disclosed; Bessemer Venture Partners,
Threshold, Salesforce Ventures and Missouri-based Permanent Equity,
where Foster is from and recently moved back, had numbered among its
original shareholders, according to PitchBook.) None of the founders
in the company participated in the sale, Fosters says: "I personally
believe a lot in what we're doing, there's no other thing I could do
with this money. If I were to take money out, the first thing I would
do is find more Zapier shares."

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With more than 300 app partners and connecting to 3,000+ apps,
Zapier's charted a different growth trajectory than the typical
software unicorn. One example: customer support. A team of about 100
employees well-versed in a range of work apps work closely with
Zapier's small customers to make sure everything's running correctly
-- an unusually big commitment for a company of Zapier's size, or
customer of its typical contracts, which starts free and runs up to
$599 per month for the full bells and whistles like live support,
still a far cry from software licenses that can run into the millions
for large businesses. (Foster says that while teams within large
companies now make up about 25% of revenue, most customers pay $19.99
or $49 per month.)

Zapier also set up a $1 million small business assistance fund for
struggling customers a year ago as the pandemic spread. Foster
predicts that coming out of Covid-19, a new wave of mom-and-pop style
small businesses of $5 million to $10 million in revenues will
flourish having made the digital jump.

Zapier's hiring and expanding software tools are also a rarity in
that they're fueled entirely by the company's sales. Employees are
eligible to receive bonuses from the company's profits should they
hit certain milestones twice a year. "We've never felt like our
balance sheet has been the thing that was holding us back from
reaching our goal," says Foster. The company announced its first
acquisition, of a no-code education business called Makerpad, on
Monday.

Now with Sequoia and Steadfast on board, Foster plans to take
advantage of some of those firms' networks and support for portfolio
companies, even if he spent years politely turning aside investors
like Andrew Reed and Karan Mehandru, the lead partners for each who
bought up shares in this raise. Asked if he'd consider a primary
funding round or even an eventual IPO, Foster says "never say never."

"For us, we've always looked at financing events, whether they're
primary, secondary or public markets, as a tool in the tool belt.
It's something that you can reach for as a person who runs a business
that can help you when you need it," says Foster. "I think that's a
much healthier approach to things than sort of getting on a hamster
wheel that is difficult to get off."

Follow me on Twitter or LinkedIn. Send me a secure tip. 
Alex Konrad
Alex Konrad

I'm a senior editor at Forbes covering venture capital, cloud and
enterprise software out of New York. I edit the Midas List, Midas
List Europe, Cloud 100 list and 30

...

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I'm a senior editor at Forbes covering venture capital, cloud and
enterprise software out of New York. I edit the Midas List, Midas
List Europe, Cloud 100 list and 30 Under 30 for VC. I'm a Fortune
Magazine and WNYC alum. My tech focus would've perplexed my college
self, as I studied medieval history and archaeology at Harvard
University. Follow me on Twitter at @alexrkonrad and email me at
akonrad@forbes.com. Securely share tips at https://www.forbes.com/
tips/

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