It’s not everyday that a technology company is able to buy out its venture backers. But that’s what happened this week when WhitePages CEO Alex Algard orchestrated an $80 million deal to buy back shares from two primary investors — Technology Crossover Ventures and Providence Equity Partners.
Those investors pumped $45 million into WhitePages in 2005, and they were looking for a return on that capital eight years later.
We caught up with Algard — who founded WhitePages in 1997 while working as an intern on Sand Hill Road in Silicon Valley — to find out more about a deal he’s been working on for about a year.
Here’s more from the conversation:
Why did you decided to buy out your investors?
Algard: “We did this for a few different reasons, but basically all of the stars aligned perfectly with a very favorable debt market in combination with the fact that we have a good amount of cash on hand as well in order to buy out our investors. Also, the business was showing some good momentum. That said, it was far from a no brainer to actually do the deal at the time. There was definitely some risk associated with the decision…. The financial momentum and the growth of the business felt good, although, again, it was not a super easy decision.”
On the investors and new opportunities:
Algard: “The investors were open to it. They had been in the business (as investors) for a while. I am very excited about what this means for the company and in retrospect, in hindsight, it definitely was a good decision for the company and employees. I think it is also win-win. Our investors got liquidity, and it has been a win for the company because we have been able to reinvest even further and focus even further on new growth initiatives that are all built around us as a data company and the new growth initiatives include our mobile efforts and also our WhitePages PRO B2B services.”
On the company’s revenue run rate of $60 million, based on the last quarter:
Algard: “We are seeing some nice growth year-over year. But the (big) story … is that we have actually doubled our profits year-over-year. I really feel like the team has come together here in a really nice way and we are blazing a trail of growth across both our core business and our new initiatives.”
Do you regret taking the venture money?
Algard: “I do think it was a win-win, not a win-lose. Our investors made good money in what was, quite frankly, not the easiest vintage for VC funds. You got to remember that they went through that whole 2008 implosion, so I feel like it was a win for investors and that it was definitely a win for the company. It has allowed us to double down in ways that we could not have done otherwise is probably the strongest wording I could use here.”
On the “cleaner” structure without VCs:
Algard: “Most VC-backed companies they have three bosses to serve if you will — the external shareholders; the customers and the employees. And that’s a lot of different people to please. In our case, for the past year now, we have been able to focus entirely on doing what’s best for our customers and our employees and not worry so much about the VC perspective. And I think we’ve been able to run the company a lot better as a result. If you look at our growth trajectory and more than doubling our profits over last year, I think some of that is definitely directly attributable to a cleaner focus by our team. In the long run, I think if we focus on what’s doing best for our customers and our employees, our company value will automatically grow as a result. And that’s not always the case when you have some external parties in there.”
What’s next for WhitePages in terms of an exit?
Algard: “We are not any specific time frame for a liquidity event for the company or an exit event for myself either. Everyone is pretty excited about our new ability to focus on building the business, so we are still kind of relishing in that. I don’t want to connect this in some way to the next liquidity milestone or something like that. But, we are not going to be run any less professionally than any VC-backed company. In fact, I think we can actually run our business a lot better.”
[Editor's note: WhitePages is a GeekWire annual sponsor]