Hootsuite: The unicorn that never was
For more than two years, it has been widely accepted that Hootsuite is one of Canada’s very few unicorns — startups worth at least US$1 billion. Turns out it was never worth that much.
Hootsuite Media Inc., whose software helps businesses manage their social media accounts and advertising campaigns, raised US$60 million at a reported valuation of US$1 billion in September 2014. In fact, the true valuation was between US$700 million and US$750 million, according to people familiar with the matter.
Hootsuite and its investors have never publicly contradicted its unicorn status, which can help startups attract top-drawer talent and brings with it a hefty dose of free marketing. As Hootsuite approaches a potential initial public offering, it’ll need all the positive publicity it can get.
A spokeswoman for Hootsuite declined to comment on its valuation or its status as a unicorn.
The term unicorn became a thing at the end of 2013 after venture capitalist Aileen Lee used it to describe the kind of billion-dollar exits the biggest venture funds now needed to justify their size. Lee found 39 so-called unicorns that November. Over the next two years, as valuations ballooned and pension managers, sovereign wealth funds and private equity investors chased venture capitalists into private tech, that number grew to more than 150.
Hootsuite’s US$60-million funding round and corresponding valuation were certainly large, especially by Canadian standards. And the company attracted some big backers, including Fidelity and the VC arm of the Ontario Municipal Employees Retirement System pension fund. Journalists and politicians, keen to show that Silicon Valley-type success was possible in Canada, heaped attention on Hootsuite. Investors and executives left the unicorn label unchallenged, said one of the people, who requested anonymity.
Valuations at private companies are based on whatever factors backers think are most important, and can differ widely from investor to investor. Fidelity, which led the US$60-million round, has since written down the value of its investment in Hootsuite.
Hootsuite is still one of Canada’s most promising tech companies. It hit cash flow positive last year and recently bought social media advertising tool AdEspresso and analytics company LiftMetrix. It’s on a short list of Canadian tech firms considering going public in 2017, people familiar with the matter told Bloomberg in November.