Q&A With GovDelivery CEO Scott Burns on the Vista Equity Partners Acquisition

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Scott Burns, cofounder & CEO, GovDelivery

On the heels of news that GovDelivery has changed ownership, we spoke with CEO Scott Burns.

Franklin Partners

What is GovDelivery’s brief history?

I cofounded the company in 2000 with partner Zach Stabenow. We were called GovDocs back then and we did two things: 1) we provided a content service for businesses that need to comply with labor law posting requirements and 2) we created software to help the government communicate with the public.

Both of those started generating revenue in 2001, and we separated the businesses in 2005/2006, changed our name to GovDelivery, and then officially spun out GovDocs in 2009/2010. GovDocs is still going strong today as a privately company with about 40 people run by Zach.

Who were the initial investors in GovDelivery?

Well, we had between 80 – 100 shareholders and despite what some may think, this is not our first exit. Harold Slawik now of New Counsel was an early investor and board member, Joy Lindsay invested as did many of my former McKinsey colleagues.

We sold a vast majority stake to Internet Capital Group (now called Actua) back in 2009 for $19.7m whereby they took a 90% interest in GovDelivery, taking it forward to date.

At a high level, what has happened to the company since that initial buyout in 2009 through now?

We have made 5 acquisitions, grown revenue by 600%, and reached 230 employees.  We also became somewhat of a public company considering that Actua is a holding company (NASDAQ: ACTA).

Would you consider this a privatization of sorts?

Yes, you could say that, it’s a bit of a non-traditional transaction in that sense. We were acting public considering our parent company was in fact publicly traded, so now we aren’t going  to bear that burden anymore, but overall, Actua was an incredible partner and we created a lot of value together.

Who are the big winners in this deal?

Just about all of our employees had some equity in the business after 2009, including myself. But the lions share the proceeds from this deal are going to Actua. In fact, they expect to realize net proceeds of about $132 million of the $153m price tag.

Most people will probably thing that I have $153 million now. I’ve been very fortunate, but that’s won’t be retiring off of this dealfar from the case…I’m still going to drive a Prius and working my ass off.

How do you feel about that?

It’s a great win! I stuck it out for 16 years, as did so many teammates. We managed our equity as best as we could and had some great investors along the way who deserve every penny given the risk they took.  I wasn’t in it for the money to begin with, and that just wasn’t the trajectory of this business, it needed to be slow cooked for many, many years. We created a lot of value and needed partners along the way to fund the business or it never would have gotten to this stage.

Do you have another 16 in you?

No! But the best days are ahead and I plan on sticking around as CEO for a while as Vista’s plan is to keep the same leadership team in place going forward.

Why did Actua sell GovDelivery to Vista Equity Partners?

The impetus was profit, right?  We had a lot of inbound interest starting in 2015 with one formal offer that made us think about it. We then talked with Actua more about that option and we agreed that the opportunity was there for them to get a great exit and us to take this business forward for the next 3-5 years with a new strategic partner.

So we ran a process starting in April/May this year, explored more options, and had at least 10+ serious offers on the table.  Vista came at the top of the list given their understanding of this business and some of their other government/public sector portfolio firms.

What does the future of GovDelivery look like as far as you can see it?

Lots of opportunity for more growth, both organically and via acquisition.  Vista has an ambitious strategy and proven experience operating on a larger level.

Where do you see opportunities out there in your space?

There are a number of smaller startups (<$5m in revenue) who are doing innovative things in how citizens interact with government. We like these companies as well as companies of larger stature that are doing things with content, CRM, and data management at scale.

And where do you see opportunity within your existing business?

In broader technology solutions and targeted professional services. We don’t want to be an outsourcer, it’s too big of an arena for us to handle that at scale. We just want to bring more people to everything that government is doing in a more targeted way.  We’ve added interactive text messaging functionality, open data tools, and learning solutions, whicha are already fueling growth.

Anything that helps citizens and government interact better, and there’s plenty of room for ongoing improvement in that sense.

What’s the biggest challenge you face?

Not getting bogged down. We have to continue serving existing clients well and maintain security and compliance, all while innovating and growing.  Getting that balance right is probably our biggest ongoing challenge.

How does your current customer footprint breakdown?

We have clients in all 50 states and every federal department uses us in one way or another. Over 130 million citizens receive communications enabled by us, that’s about a billion messages/month.

How about your employee footprint?

About 150 in St. Paul, about 60 in Washington DC, and about 10 in the UK.

What does this transaction mean for GovDelivery’s future in St. Paul?

Vista Equity Partners plans to keep us headquartered here, plus they have another portfolio company already in Minnesota, Newscycle Solutions. And our lease isn’t up until 2018.

…so you will be moving locations one way or the other at that point?

Yes. But I’d love to see the business stay in St. Paul.

Is there anything else you would like to add?

It’s exciting to be part of the tech wave in Minnesota right now.

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