The PowerReviews backstory: how we raised $42 million in 90 days to make a transformative acquisition

by Matt Moog
September 23, 2014

As a member of the Chicago tech community some of you know that I founded Viewpoints eight years ago.  We recently acquired PowerReviews and I wanted to share some of the back story with you as way to tell our story and in the process help other entrepreneurs on their journey.

 

Where to begin…..

 

Way back in 2005 when taking Q Interactive private, I identified consumer reviews as one of the most promising and valuable types of content on the web.  So after ten years of hard won experience taking Q Interactive (originally known as CoolSavings) from startup to public company, I decided to start Viewpoints in late 2006.  The original business plan for Viewpoints focused on creating a more social and open platform for consumer reviews.  Along with an amazing team (Leon Chism, Jolie Fleming, Kevin Lilly, Kim Smith and others) we created a website that has had more than 120 million users since it launched.   

 

Along the way we struck strategic partnerships with Sears Holding, Discover Financial and Bloomberg by leveraging our technology and experience to help them find ways to better engage their customers through technology. These partnerships helped us realize that a SaaS business model focused on consumer reviews had better long term prospects than an advertising supported model.  

 

So in late 2013 we made the decision to start to transform the Viewpoints model to a subscription based software model.  And in January 2014 we launched a product called Viewpoints Pulse. As good fortune would have it, that same month the Federal District Court issued an opinion that found Bazaarvoice had violated anti-trust laws when they acquired PowerReviews 18 months earlier.  With 1,000+ leading retailers and brands around world PowerReviews is the second largest provider of technology to help consumer brands collect and syndicate ratings and reviews and questions and answers.

 

To make a long story short, we put in a bid shortly after learning that a divestiture was required and on April 8th signed a letter of intent with BazaarVoice to purchase PowerReviews.  On June 7th we announced we had signed the definitive agreement and on July 2nd, after receiving final approval from the DOJ, we closed on the deal.   In that space of time we ultimately raised over $42 million (ABS Capital, Square 1 and others) to fund the acquisition and provide growth capital to fund our expansion.

 

One important aspect of this deal is that Bazaarvoice had to agree to a series of conditions which would help return competition to the market.  To quote from the DOJ’s press release:

 

“The proposed remedy requires Bazaarvoice to sell all of the PowerReviews assets to a divestiture buyer and contains other provisions to compensate for the deterioration of PowerReviews’ competitive position that occurred as a result of the transaction.  Under the terms of the agreement, Bazaarvoice is required to provide syndication services to the divestiture buyer for four years, allowing the divestiture buyer to build its customer base and develop its own syndication network.  Bazaarvoice is required to waive breach of contract claims against its customers, allowing them to switch to the divestiture buyer without penalty.  Bazaarvoice is also required to waive trade-secret restrictions for any of its employees who are hired by the divestiture buyer, enabling the buyer to leverage Bazaarvoice’s post-merger research and development efforts. “

 

While this is not a comprehensive list, a few things we learned during this process that other entrepreneurs might find valuable:

 

Keep a list of interested investors

If you are an entrepreneur running a growth business you will get calls from interested investors.  Even if you are not currently raising money, keep their information. You never know when opportunity will knock.   I did and it helped me quickly reach out to 50+ potential investors in just a few days.  Since we had such a short window I had to cast a wide net.  Getting a deal done in such a short period of time was no easy task.  

 

Keep your talent network warm

I had met Jay Fehnel over a cup of coffee only a short time before starting this process.  Jay turned out to be instrumental in getting the deal done.  The same with Candance Chow who I had worked with years and years ago. They both joined the deal team and played critical roles.  On April 12th I reached out to Theresa O’Neil on LinkedIn.  I had never met her before but I ran across her profile and it looked perfect.  By May 5th she had joined us as a contractor to lead the marketing effort and she recently accepted the full time role of SVP of Marketing.  And Jeff Leff, a fellow FireStarter member referred Kira Meinzer to us as a VP of HR on July 2nd.  She started in early August.

 

Nurture relationships with service providers

Michael Gray at Neal Gerber has been our attorney for eight years.  His team worked 24/7 on this deal to get it done. Mary Heatter, Brian Langham and team at Plante Moran stepped in and provided deal related accounting services.  Michelle Joseph and team at People Foundry have done an amazing job helping us fill the 30+ open positions we have. Mike Roznowski played an important role in our fundraising process.  Stax did a first class job helping us do customer due diligence.  And Mark and Fletcher at True Capital Partners just helped us land our SVP of Sales.

 

ABS Capital and Square 1 led the equity and debt financing.  They are among the best in the business and we are fortunate to partner with them.  Both came to us via mutual relationships.

 

Find someone internally to manage the deal process

We had the extremely good fortune of having Chris Lubkert on our team in another role.  Chris had a background in private equity and was able to play an absolutely critical role helping to get this deal done.  We could not have done the deal without Chris.  He is now our SVP of Strategy & Operations.

 

Know when to give it all you have

This was an unusual opportunity and from the beginning the entire team committed to putting in the hours and seeing this all the way through.  There were many very late nights and weekend conference calls and sweating it out when the air conditioning shut down, but in the end we knew PowerReviews was a fantastic company and all the work was worth it.  And it was great having a fully committed team who understood the sense of urgency and importance. 

 

Keep good records!

Make sure you have employment contracts for everyone, you have perfectly documented option agreements and all service providers have signed agreements.  Trust me, you will thank me later.  And you should probably scan all of them and have them nicely organized because when you raise money investors will ask for all of it.

 

Those are some of the lessons. More to follow. As has been said before "chance favors the prepared mind" so be prepared next time an opportunity comes along!

 
 
 
 
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