A look at Grabcad’s stellar exit
Since I ran into Grabcad’s founder Hardi Meybaum this morning at the Point Nine Capital event outside Berlin, I thought I’d look at his company as the next exit to be featured on Real Exits.
Founded in 2009 in Estonia, Grabcad was a highly innovative, technical solution and vertical social network for the mechanical design community.
Back when I was a VC I heard Hardi’s pitch at the Techstars Boston demo day in 2011. It was highly compelling. I think Fred Destin invested on the spot back when he was at Atlas Ventures (now Accomplice).
As a reminder, “Real Exits” is our term for sub $100M exits. The kind of deals most entrepreneurs are likely to experience, rather than the massive blockbusters that dominate the headlines. Grabcad’s deal comes in at the top of the Real Exit scale. Here are the highlights:
I have crunched the numbers on this. Since they’re only in securities filings and not broadly published, I’ll spare the details, but share the take aways:
- The company raised 3 very small seed rounds and went though two incubators (Seedcamp and Techstars) before raising it’s series A.
- From there, it experienced very rapid growth and very rapid increases in valuation.
- In less than 12 months, it raised a $5M Series A + an $8M Series B and saw it’s valuation increase over 4x.
- In just under 2 years after the series B, the company sold for ~$100M, an almost 4x increase over the series B price.
- Even if they are not actively involved in your exit discussions, the presence of tier 1 investment funds often forces buyers to not mess around.
- In this case, Grabcad engaged an investment banker to manage the process and create competitive pressure.
What you see in this evolution is a slow, capital efficient “incubation” period, followed by a massive increase in momentum and valuation. This is exactly what venture capital is designed for and exactly what VCs seek out. By my calculations, the series A investors generated an internal rate of return (IRR) of 101%. The Bs got an IRR of 74%. That’s a great result!
All great outcomes are the result of great execution (implying a great team), a differentiated product and a heavy dose of luck and timing. From the outside looking in, Grabcad had all of those elements. They built a truly differentiated offering. The social network component of the offering was truly unique and of interest to the market. They managed to generate massive momentum and used that momentum to create a competitive buying process.
Lots of great lessons to emulate in your own exit planning.
