Power

A $1.5 billion series A? Here’s what’s behind those giant rounds.

It's not just an out-of-control funding market.

Illustration of an entrepreneur raining money into the air.

It's raining money. (Hallelujah?)

Illustration: Nuthawut Somsuk/Getty Images

Perch raised a "historic" $775 million on May 26. Transmit Security raised the "largest cybersecurity series A round" ever of $543 million a month later. On Thursday, Articulate is announcing "one of the largest series A rounds in history" — a whopping $1.5 billion for a company that makes software to create online training apps.

No, it's not a sign of an out-of-control funding market (although the funding market is out of control and cash is easy to come by). There's more to these mega-rounds than meets the eye.

Take Articulate, which on Thursday announced that it had raised a cool billion and a half from General Atlantic, Blackstone Growth and ICONIQ Growth for its series A round. The paperwork was all labeled series A because it's the first institutional funding that the company has raised, but it doesn't fit the profile of your typical series A company that raises around $9 million.

Instead, Articulate was founded in 2002 and has been bootstrapped since Adam Schwartz started it with his life savings. The nearly 20-year-old company employs over 300 people in a fully-remote workforce and builds software that enables people to easily build online learning apps. It's profitable and has over 106,000 customers, including all of the Fortune 100, Schwartz said.

Yet despite operating a profitable and growing business, Schwartz and Articulate President Lucy Suros decided it was time for the company to finally raise some cash, pointing to a confluence of trends like remote work and the consumerization of the enterprise. It was less about the money and more about just having investors around the table who had seen growth before and knew the scaffolding needed to take it to the next level, Suros said.

"You don't generally go from high school sports to the pro leagues," Schwartz added. "This is in some ways like our college years. "

Its growth had already caught the eye of General Atlantic's Anton Levy, who had been close to the company for years. The growth equity firm led the investment alongside Blackstone and ICONIQ. The deal didn't include debt, but it is a mix of primary and secondary funding that values Articulate at $3.75 billion.

The company plans to use the cash to expand hiring and try to grow its sales both in the U.S. and internationally. It can also invest more aggressively in R&D, or, as Levy pointed out, consider M&A as a way to grow and scale.

"It's a great opportunity because those things haven't been done yet, simply for the fact he didn't have that kind of big large capital base around," Levy said. "So for us, it's an exciting opportunity to use capital strategically to flex a growth rate and really try to grow a platform."

Articulate wasn't the only giant series A. Just two weeks ago, General Atlantic announced a similar investment of $543 million in a series A round for Transmit, touted as the largest series A for a cybersecurity firm ever. The company similarly started out bootstrapped in 2014, before it started seeing the downsides of not taking venture money.

"We are in a highly competitive human capital race," Transmit co-founder Mickey Boodaei told Geektime. "Today, when we recruit, we're always compared to other companies that raised this and are valued at that. They often don't understand that unlike a company which has raised $100 million at a $500 million valuation, the bootstrap story we tell them offers so much more opportunity."

Others, like Perch's $775 million series A led by SoftBank, are combining an equity fundraise with debt. Perch is part of a new cohort of startups that are basically acting like PE shops and rolling up Amazon sellers. It needs a different level of cash to be able to continue to buy businesses compared to a SaaS company fundraise.

So is it right to consider these "series A" rounds if the companies are profitable operations that employ hundreds of people? As Levy points out, an IPO is called an IPO whether it's Facebook going public or a company doing $30 million in revenue. It still counts as a series A if it's the first institutional capital into a company.

"These are very, very special companies when you come across some of these companies that are proven business models growing at scale," Levy said. "They don't come around all that often."

Correction: An earlier version of this story misspelled Mickey Boodaei's name. This story was updated on July 1, 2021.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins