Hootsuite founder and chief executive Ryan Holmes announced Tuesday that he plans to step aside, and the company will begin a search for a new CEO.
In an exclusive interview with the Financial Post, Holmes said he plans to continue to serve as executive chairman of the Vancouver-based social media management company he started in 2008.
Hootsuite makes tools for enterprise social media managers to monitor and post content across Facebook, Twitter, LinkedIn and other platforms. Hootsuite operates on a freemium model, and the company says it has more than 200,000 paying customers.
Speaking to the Financial Post, Holmes said he wanted to make it clear that the business is on a solid footing as he prepares to take a step back.
About a year ago, the company declined to comment on media reports that it had retained Goldman Sachs to explore a possible sale. Then in April of this year, Hootsuite reportedly laid off approximately 10 per cent of its workforce, which fuelled speculation that the company was gearing up for a sale or an initial public offering.
Holmes confirmed that the company explored the possibility of a sale in 2018, but said nothing came of it.
“The board is beholden to its shareholders and there was some inbound interest,” he said “We felt it prudent and our responsibility as a board to investigate that inbound interest and so we started the process with Goldman Sachs to have a broader market check.”
As for the financial health of the company, Holmes said the restructuring allowed Hootsuite to achieve profitability and refocus the business, but he downplayed the possibility of an IPO in the near future.
“We look at a lot of companies that are IPOing and in the last little while, and I’m sure you’re following some of these names that are burning cash at a very high rate, and we decided that we wanted to be a company that was growing but also profitable,” Holmes said. “Because of that we can decide if and when we want to go public. And if we do so, it’ll be because we want to, not because we’re forced to in order to make our next payment.”
Holmes said he is stepping back now because he wants to spend more time with his family, something that has become a bigger priority since the birth of his daughter.
“It’s not a snap decision,” he said. “I’m down to Mexico right now with my family and spending a bit of time with them. And, you know, I want to really enjoy this chapter.”
Hootsuite has historically flirted with the “unicorn” moniker given to tech startups that achieve a valuation of $1 billion. A 2014 funding round reportedly put the valuation of the company at $1 billion, but follow-up news stories cast doubts on whether it was actually worth that much.
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When rumours of a sale surfaced last year, Bloomberg reported the price was “at least $750 million.”
In a letter to shareholders announcing his departure plans, Holmes laid out some numbers from a “benchmarking exercise” earlier this year, looking at other companies that went public.
Holmes said three numbers stuck out to him — average age of 14 years old, average annual recurring revenue of $200 million, and an average valuation of $3.6 billion.
In the same note, Holmes disclosed that Hootsuite is on track for $200 million in annual recurring revenue this year, and that the company is 11 years old.
“As Hootsuite will hit the ARR revenue benchmark this year, it tells me we’ve built something at a breakneck speed, that is highly valuable,” Holmes said in his note to shareholders. “Through this year we’ve been especially focused on remaining cash-flow positive vs. a growth at all-cost strategy; given the public markets’ recent reaction to grow at all cost companies, we’re even more bullish on this approach.”
Speaking to the Financial Post, he said an IPO or a sale is still a possibility, but the primary mandate for the new chief executive will be to expand the company’s product offerings, explore possible acquisitions and further strengthen the business.
“And if we do well at that, you know, we will ultimately be rewarded, whether it is an IPO or through inbound interest through M&A, but that’s not going to be the prime focus of the successor,” Holmes said.
He also reflected on the evolution of social media in the 11 years since the company started. Holmes said that he sees the current public scrutiny of platforms like Facebook and Twitter as an inevitable consequence of those services gaining widespread adoption. He likened the current moment to when government started taking television, radio and telephone technology seriously, and moved to regulate those systems.
In the end, he said he believes these will be good growing pains for social media.
“It would be a terrible thing if they were continuing to run really loose and data kept leaking,” he said.
“Ultimately, this is really important stuff that needs to be investigated. This is the best thing for the consumer at the end of the day that this is tightened up and, ultimately, because of that, I think it’s the best thing for the social networks.”