Digital advertising and marketing software program corporations have lengthy stayed away from big-shot IPOs. Yet the most important inventory market 12 months, 2020, reshuffled the playing cards.
In late March 2021, Semrush filed for an IPO on the NYSE (SEMR). At across the identical time, different digital intelligence and advertising and marketing tech manufacturers additionally went public.
Unlike some bootstrapped startup IPOs that may favor to use extra dangerous IPO paths (suppose special-purpose acquisition corporations, or SPACs as they’re known as), Semrush, a well-established digital advertising and marketing platform already outstanding inside its area of interest (and the darling of the search engine optimization and martech awards scene), determined to go public the normal manner.
They managed to get to some stable and sustainable development numbers earlier than deciding to file for an IPO.
Oleg Shchegolev, one of many Semrush co-founders, shares his story in the direction of success and a firm valued at greater than $2 billion.
The Background Story
Back in 2008, Oleg Shchegolev and Dmitry Melnikov based Semrush, initially an SEM-focused device for scouting rivals’ on-line advertising and marketing methods.
They began with constructing a device for themselves. Later, the founders shared it with a circle of mates, who shared it with their mates – that’s how Semrush’s performance began getting larger recognition among the many digital entrepreneurs’ viewers.
Always very community-driven and user-friendly, Semrush began to get severe about enterprise someplace round 2013, when each Oleg and Dmitry realized that that they had a stable model and determined it was time to get to focused product growth, development, and enlargement.
As Oleg places it, “advertising and marketing is about insights, experiments, traits, and analysis. We have all the time centered on serving to purchasers discover or develop new, dynamic concepts. It’s true that once we began 13 years in the past, we provided providers that allowed you simply to analyze different websites. Still, even then, we had been centered on market analysis and evaluation as means to a larger, extra complete advertising and marketing technique”.
By 2021, Semrush had grown into a versatile platform that enabled its customers to take care of each key facet of on-line visibility — from search engine optimization, content material administration, and promoting to social media, market evaluation, and aggressive analysis. This comprehensiveness, full advertising and marketing workflow protection, and an all-in-one method differentiate Semrush from different extra fragmented advertising and marketing options. With 50+ instruments throughout its product suite, Semrush now has greater than 72,000 paid customers, together with big manufacturers reminiscent of Tesla, Apple, P&G, and extra.
Business-model-wise, Semrush’s income development is supported by a freemium mannequin enabling the corporate to purchase new prospects cost-effectively. Semrush’s efficient pricing mannequin was designed to tackle all person ranges from free to small, medium, and enormous companies – and encourage prospects to improve their subscriptions and buy add-ons.
Over the years, Semrush has constructed a giant and various person base with prospects of all sizes and business verticals, from retail to finance to advert businesses to software program and media corporations.
Semrush has seven workplaces across the globe throughout a few continents. The firm’s annual income in 2020 was $125 million.
How Semrush Found the Money to Grow Its Brand
Oleg and Dmitry all the time noticed Semrush’s development as internal-driven. With a massive emphasis on community-building and a product/customer-centric method, the corporate grew at excessive but sustainable charges.
A giant dream led the 2 co-founders: they believed that advertising and marketing would grow to be a talent everybody would purchase with time.
The pandemic solely strengthened this perception, with many companies turning to accelerated digitization – a development they noticed lengthy earlier than it was a factor.
With their “everybody’s a marketer” method, Oleg and Dmitri realized that the platform had great viewers potential. If they needed to ship the product to everybody, they could have to increase exterior capital.
Up to 2017, Semrush was rising at its tempo with none buyers. Operating as a bootstrapped startup not solely allowed the model to laser-focus its sources and efforts on methods and merchandise that mattered, it additionally enhanced worker engagement and general efficiency. The startup ambiance tends to promote and encourage unbelievable company-wide drive and motivation.
In 2017, although, the founders began to take into account attracting some exterior money to supercharge the corporate’s development.
“Extra cash was the least essential goal throughout our funding rounds. We needed buyers who had the identical imaginative and prescient for the way forward for on-line advertising and marketing, who understood that it’s a fast-changing overarching course of (fairly than merely a area) that has the utmost significance in immediately’s world. We are a product-led development firm, and it was essential to discover somebody who believed in the identical concepts,” says Oleg.
In 2018, they raised $37 million in capital from buyers reminiscent of Greycroft and e.ventures.
“Years later, I can say that this was the very best determination we might make at the moment. Our buyers had been invaluable in serving to us handle and navigate by means of the unbelievable development we’ve skilled over time because the very first funding spherical. We received far more than simply cash – we received recommendation, suggestions, connections, and actual engagement,” says Eugene Levin, Chief Strategy Officer that was one of many headliners of the investing course of.
Finding the Balance Between Bootstrapped Development and External-Driven Growth
The journey in the direction of funding was a prolonged one. It took round ten years to construct such a complete platform, guaranteeing that each function and performance compares to, and even goes past, the highest options throughout all key digital advertising and marketing elements. So even earlier than funding, Semrush was already rising at a cheap scale.
Unlike Semrush, some founders rush into funding offers and begin the corporate with an “I’ll construct a promising model simply to take it to a big-shot sale” mindset. Some startups go down this path, however this could solely be the case for founders who aren’t trying to construct a sustainable enterprise.
Yet this fashion, you may lose your leverage over the funding deal and find yourself dropping management over the corporate’s future.
This is what Semrush’s founders had been cautious about once they began pondering of attracting exterior funding. The determination not to increase cash till the corporate had reached a level the place it was seeing sustainable traction helped Semrush protect its long-term imaginative and prescient with out essentially being tempted by short-term good points.
One manner to construct a sustainable international model is to discover the right steadiness between bootstrapped growth and exterior development drivers. Some might consider it as a alternative between staying small and being absolutely impartial and increasing your attain with the assistance of buyers. Yet Semrush’s instance reveals that you could reconcile each by focusing on explicit buyers who go the cultural match and share your concepts in regards to the firm’s future.
Oleg shares that “it was definitely doable to stay a bootstrap. But in some unspecified time in the future, it grew to become clear that funding might function a set off. By remaining a bootstrap, it was difficult to take a look at our enterprise globally. It looks like we understood all the things in regards to the market and customers and the long run, however it was all by some means with out getting out of its shell. We wanted to see the large image to develop additional. Hypothetically, we might have accomplished this with out elevating cash, however it will merely take longer, and we had been already rising out of our shell fairly quick.”
The path to IPO isn’t one thing you simply determine on immediately and go for tomorrow. It’s usually a well-thought-through course of occasions, and in the end, it had to occur for Semrush.
Semrush felt assured in its determination to go public, and its development numbers solely supported the timing of Semrush’s determination:
Semrush’s compounded common annual development price between December 31, 2016, and December 31, 2020, was over 50%.
Semrush achieved $6.8 million ARR from a single add-on product in 8 quarters from launch.
Semrush’s dollar-based internet income retention price in the course of the 12 months ending December 31, 2020, was 114%. In different phrases, this reveals that the income from purchasers on the finish of 2019 had grown by 14% in 2020.
As Eugene Levin shares, “an essential metric we monitor is income by cohort, and now we have constantly seen every cohort develop purchases over time. This confirms the standard of our product and the worth we ship to our prospects”.
Given the robust efficiency and constant development, in March 2021, Semrush went up to NYSE to ring the opening bell.
The IPO was additionally an effort to promote the thought of selling turning into a widespread factor, which each and every particular person needs to be taught in the identical manner as Word or Excel, and thru Semrush occasions reminiscent of Global Marketing Day, is turning into a actuality. We’re dwelling in an period of digital manufacturers, startups, and ecosystems, and every particular person needs to be prepared to navigate on this digital ocean, with advertising and marketing turning into a mariner’s compass. That compass is Semrush.