Read the 7 reflections from Icehouse Ventures CEO Robbie Paul, following Tradify's impending acquisition by Access Group.
I am delighted to share that Tradify announced their impending acquisition by Access Group this morning. See the announcement here. Please note this transaction is subject to OIO approval and the anticipated completion date is the 31st of October. The transaction value will remain confidential.
Tradify is a best-in-class jobs management software trusted by thousands of electricians, plumbers, and other tradespeople. Their platform brings together customer enquiries, quotes, service reminders, staffing, invoices, and more. Founded by Curtis Bailey in 2013, it has grown from a single desk at Icehouse Ventures to a team of 107 serving a global customer base of 20,000.
Self-funded for several years, Tradify then attracted the attention of support of serial-entrepreneur Adam Clark. Adam led two seed rounds that Icehouse Ventures supported in 2016 and 2017. We later invested alongside Movac in Tradify’s 2021 Series A and 2022 Series B.
Assuming it proceeds as planned, this will be the largest cash return to date for Icehouse Ventures investors. >500 investors including those in our Seed Fund I, IV100 Fund I, and Growth Fund I will receive profits from this transaction. 20 IV investors will receive six figure payouts and three will receive seven figures.
This is a great milestone and testament to the leadership of Tradify CEO Michael Steckler and the hard work by the whole team. A huge thanks on behalf of the whole Icehouse Ventures community.
Below are a few reflections on Tradify’s journey and why it’s a great reminder of the bright future ahead for New Zealand’s venture ecosystem.
Growth Fund II Final Close
Tradify is a great proof point as we approach the final close for our Growth Fund II fundraise. Growth Fund II is our active venture fund that invests in later-stage and high-growth technology companies. Like Tradify, target companies are de-risked relative to startups and have shorter time horizons to returns.
Large and growing companies like Tradify are highly sought-after. This has been evident with other portfolio companies including Halter, Hnry, Tracksuit, and Crimson.
Growth Fund II is advantaged by the information, relationships, and pre-emptive rights that Icehouse Venture has as a result of being the most active early-stage investor for many years. Our Growth Fund investment in Tradify was based upon a six-year relationship with the company and two prior seed rounds.
I hope you’ll consider joining us as we support more companies like Tradify. You can learn more and get involved here.
Thanks,
Robbie
Reflections on Tradify and the venture ecosystem
- 1. Bad news: it takes time. Good news: it takes time. Tradify is 10 years old. Kami, who announced their $300m transaction last month, is 10 years old. PowerbyProxi was 10. Vend was 12. Rocket Lab was 14. To appreciate how much potential value is to come, look at the 5+ year old companies like Auror, Halter, Sharesies, Mint, Dawn, partly, Re-Leased, Fuel50, LawVu, Shuttlerock, Spalk, and Crimson.
- 2. Valuations start as an art and end as a science. Tradify had a small team serving customers in New Zealand when we invested in their first round in 2016. The valuation necessarily had to attribute significant value to their future prospects. I say necessarily because if the valuation only reflected their metrics then the $800k round would have purchased a majority of the company and undermined its future prospects. The important balancing act, however, is ensuring future returns are not impaired by a valuation that attributes too much value to future prospects. In the end, there are pretty consistent revenue multiples paid for software businesses, typically ranging from 6-15x. You can work backward from there to inform seed round valuations.
- 3. Multiple vs IRR. One reservation we faced when we raised Growth Fund I was that late-stage rounds come with significantly higher valuations. It’s harder to get a high-multiple return on a $100m valuation than it is a $2m valuation. That is true but it doesn’t take into account the dilution and time associated with a seed stage company reaching its final destination. This transaction will generate an 18x return for our Seed Fund I investment and only a 2.3x return for Growth Fund. That’s a notable difference but the IRR tells a different story: this return will generate a 47% IRR for Seed Fund I vs. a 36% IRR for Growth Fund I. My optimistic takeaway is that entrepreneurship is such a powerful force that it can make any permutation of a fund strategy work :)
- 4. Secondaries are here to stay. Among the more costly decisions we have made was to pass on purchasing Tradify secondaries in a 2020 transaction. These shares will generate a 6x+ return for the clever investors who took part. At the time, secondaries were way less prevalent in the market. The general view was that any money interested in shares in a company should be directed to the company, not lining the pockets of outgoing shareholders. There were also signalling concerns: what does a selling shareholder know that I don’t? Fast forward a few years and secondaries have proven to be very effective at enabling Growth Fund I and other funds to grow ownership in great companies. We have been voracious consumers of secondaries in the likes of Hnry, Halter, Crimson, and Tracksuit – and often these shares are purchased at a discount. They have the added advantage of enabling founders to take a small amount of money off the table without coming as a cost to shareholders.
- 5. CEO/ Founder transitions can work. Despite his pedigree, I have to admit I was apprehensive when Michael took over as CEO in 2020. Most of us have seen transitions come with challenges, result in further leadership transitions, or signal potentially fatal issues. VCs also have a romantic notion of backing founders that can go the distance. In this case, Michael’s leadership enabled Tradify to significantly level up. He attracted new capital, expanded into the UK, and led the team to 5x revenue growth.
- 6. NZ’s venture bench is getting deeper. Michael is a great example. Prior to joining Tradify, Michael was Chief Revenue Officer at Shuttlerock, another great Kiwi technology company. He joined Shuttlerock after a successful decade in tech in New York and the UK. Michael was recruited by Adam Clark, a serial entrepreneur who co-founded mCom and was the first external investor in Tradify. As they started to scale they were able to attract all of the growth capital they needed from local investors Movac, Icehouse Ventures, and Sir Stephen Tindall. These examples are considerably more prevalent and substantive than they were a decade ago.
- 7. The floodgates are opening. Between Kami and Tradify, hundreds of millions will be injected back into the startup ecosystem. Many millionaires will be minted. If the last two decades are anything to go by, all of the capital, experience, relationships, and ambition will be re-invested into building the next generation of Tradifys. I am super excited to see this ecosystem rise and rise.
Finally, a reminder from our Growth Fund I report that companies take time to become consequential - and that more great companies are on their way up!