By 2010, Anthony Casalena was seven years into bootstrapping his start-up Squarespace, which he had grown from a dorm room project at the University of Maryland into a business with US$10 million in revenue, CNBC reports.
That’s when Getty Images approached him to see if he wanted to sell.
Casalena considered the offer long and hard, but he didn’t want to give up control. Instead, he opted to stay independent and bring in outside investors for the first time, allowing him to accelerate hiring and product development and also sell some of his stock.
He didn’t know it at the time, but in raising a US$38.5 million financing round, Casalena was making a billion-dollar decision for himself and a highly lucrative one for venture firms Index Ventures and Accel Partners.
Squarespace, which sells tools for easy website creation and publishing, debuted on the New York Stock Exchange on Wednesday with a market value of US$6.6 billion. Casalena, the company’s biggest stakeholder, owns shares worth US$2.4 billion, while Index and Accel control holdings valued at $944 million and US$750 million, respectively.
Because Squarespace went public through a direct listing rather than raising capital in an IPO, insiders can start selling right away and don’t have to wait for a lock-up expiration. Their stakes listed above include some sales that they registered to trade right away, including 6.2 million registered by Casalena.
“A direct listing fit for us because Squarespace has been a profitable company for a number of years and we don’t need to raise money in this event,” Casalena told CNBC’s “Squawk Box” on Wednesday. “Our thinking was pursue the direct listing, give people the option to buy if they want to buy, sell if they want to sell. What’s great about the direct listing is no one’s suffering unnecessary dilution today.”
Squarespace had a rough debut, opening at US$48, below its US$50 reference price on the NYSE. In March, the company raised a private round at US$68.42 a share, valuing the business at US$10 billion. Stocks were broadly down on Wednesday, and cloud software stocks have been badly underperforming the market this year, as investors rotate out of risk.
Still, at 38 years old, Casalena is the latest tech entrepreneur to join the billionaire ranks as high-growth companies that had filled up the IPO pipeline in recent years hit the market with big valuations. The founders of Affirm, Roblox, Coinbase, Bumble, UiPath and AppLovin have all entered the three-comma club this year.
Squarespace competes most directly with companies such as Wix, Automattic’s WordPress, Square’s Weebly and Shopify. The company has 3.7 million subscribers.
Revenue last year grew by 28 percent to US$621.1 million. Net income narrowed to $30.6 million from US$58.2 million a year earlier, as the company boosted spending on sales and marketing by 40% “in light of the accelerating trends in the amount of time and money consumers are spending online during the pandemic,” Squarespace said in its prospectus.
The Squarespace story began in 2003 at a student apartment complex called South Campus Commons in College Park, Maryland. While in school, Casalena was looking for a website that enabled easy online publishing, but he found the existing services such as Blogger insufficient. He coded together his own and soon found that someone wanted to pay him to use it.
“The blog was the anchor, but it was always about doing more with it,” Casalena told the NPR podcast How I Built This with Guy Raz, in 2019.
Casalena eventually persuaded his dad to give him US$30,000 so he could buy a couple of servers and house them in a data center in New York. After college, he drove to Manhattan and took up residence in a fourth-floor walkup apartment that he’d found on Craigslist.
Over the next few years, Squarespace grew steadily with a skeleton crew and little structure. In 2007, Casalena started trying to professionalize operations and even hired a more seasoned executive as CEO. He realized that approach wasn’t going to work.
“I learned a lot of lessons the hard way, by literally making, I think, pretty much every possible mistake one can make,” Casalena told Raz. “I didn’t know what I was getting into.”
Meanwhile, Accel had been keeping a close eye on Casalena. The firm, which was best known for an early bet on Facebook, had begun looking for internet and software businesses across the globe that were gaining significant traction without venture funding. Someday, Accel’s thinking went, these founders may want to raise money to make an acquisition or seek funding to hire some more expensive talent.
“In those situations, we want to do our best to build a relationship and try to be there when perhaps they evolve their thinking,” Andrew Braccia, the Accel partner who ended up leading the Squarespace investment, said in an interview.
Accel used a similar approach to invest in Atlassian, an Australian software company whose products were popular with developers, and Qualtrics, a family-run cloud software business in Utah. Atlassian now has a market cap of US$54 billion, and Qualtrics was acquired by SAP in 2018 for US$8 billion, before spinning out this year into a publicly traded company worth US$17 billion.