Upserve, a payments processor that purchased Breadcrumb POS from Groupon, has recently announced a placement by private equity (PE) firm Vista Equity Partners.
Details of the financing weren’t disclosed, but we can back into a reasonable number with some math.
Upserve boasts 10,000 merchants. When you figure their processing rates, annual revenue run rate (ARR) is around $15MM. Depending on growth, Upserve trades between 5 and 10x on the revenue multiple. Let’s assume best case and say they’re worth $150MM.
PE groups must own 50% of the company, which means Vista placed at least $75MM. However, given that Upserve has taken money since 2009, meaning they’re as long in the tooth as venture investors will allow them to go, most of that $75MM would go towards secondary financing, or buying out previous investors. Upserve has raised north of $40MM at this point and it’s fair to assume these investors will need 2x at least to meet their 25 IRR goals. That means that roughly $80MM would be needed to buy out existing investors.
Note: some of that $40MM was probably debt, and not all $40MM was invested at the same time, but don’t quibble on the nuances here.
This $75MM would give Upserve little working capital for M&A:
Asked how the company is going to use the investment, Davis said they will continue investing in building the product capabilities, looking at M&A opportunities and growing the size of the team.
We take this to mean they likely secured more than $75MM, giving Vista more ownership and Upserve more working capital.
By our math this would make Upserve at least the second most funded POS company in the US, behind Revel’s staggering $130MM.
Upserve has succeeded because POS and payments companies are mostly incompetent. The commoditized days of POS and payments are over – merchants now require more value. Vista Equity Partners was willing to stick (potentially) $100MM or more behind that theory.