Squarepace: The IPO Deep Dive

If you’re a business looking to have an online presence, you might have tried creating your own website through one of the templates on a website-building…well, website.

I am Cassandra Leah and this is a deep dive on Squarespace.

The American website building and hosting company Squarespace is set to go public through a direct listing on the New York Stock Exchange. It is reported that the company will go public with around 70.8 million Class A shares outstanding under the ticker symbol SQSP.

This comes after Squarespace just raised US$300 million in its latest round of funding, putting the company’s valuation at US$10 billion.How did a website-building business get to this point? Well, it is not without its merits.

Squarespace started as a personal blog hosting service by its founder Anthony Casalena while attending the University of Maryland. In 2004, he launched it as a DIY website builder using US$30,000 in seed money from his father and a small grant from the university. Three years later, the company was earning US$1 million annually.

Casalena moved the company to New York and started building it with 30 employees. That’s also when Squarespace started its series of funding from venture capitalists like Index Ventures and Accel Partners. By the end of 2020, Squarespace had 1,256 employees and recorded annual revenue of US$621.1 million, a 28% increase year-on-year.

Squarespace basically offers services to businesses who can’t afford software developers and designers to create a website. Through monthly and annual subscriptions, anyone can put up their own website from Squarespace templates. All a user has to do is to select website assets applicable to them, edit with their own text or photos, and publish it as their own website.

Needless to say, Squarespace earns a big part of its revenues from subscriptions, which made up 94% of 2020’s annual revenue. The other revenue source comes from transaction fees with partner payment gateways integrated into Squarespace.

When the pandemic hit, e-commerce skyrocketed, bringing with it web-based services such as Squarespace. By the end of 2020, Squarespace had over 3.6 million unique subscriptions, a 23% increase from the prior year, while generating $150 million in free cash flow from operations.

Squarespace was also able to grow, thanks in part to its aggressive marketing efforts. The company started placing Super Bowl ad spots in 2014 and won an Emmy Award for Outstanding Commercial in 2017. That year, the New York-based company also signed a sponsorship with the professional basketball team the New York Knicks.

In Squarespace’s prospectus filed with the SEC for a direct listing on NYSE, it showed that the founder and CEO Anthony Casalena owns 33% of the company. If the current valuation of Squarespace is at US$10 billion, this puts Casalena’s ownership value at over US$3 billion–making him a shoo-in in the billionaire lists.

With its business model, Squarespace is focused on small and medium enterprises for its customer base. Casalena wrote in the SEC prospectus: “I was immediately frustrated by the lack of polish and the integration work required to build even something simple using the technologies available at the time. Squarespace was born of that frustration.” This strategy continues to be apparent with Squarespace’s recent US$400 million acquisition of online restaurant booking platform, Tock.

Through the direct listing, Squarespace plans to list Class A stock, which gets one vote each, while its Class B and Class C stock will remain unlisted. But, Casalena will still hold the majority of Squarespace’s voting power.

From building websites to building wealth, Squarespace has enjoyed quite the ride.

---

The author has no securities or affiliations related to any organization mentioned. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.