Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “SurveyMonkey,” “the company,” “we,” “us” and “our” in this prospectus refer to SVMK Inc. and its consolidated subsidiaries.Overview
We are a leading global provider of survey software products that enable organizations to engage with their key constituents, including their customers, employees and the markets they serve. Founded in 1999, SurveyMonkey changed the way people gather feedback by making it easy for anyone to create their own online surveys. Today, SurveyMonkey’s mission is to power curious individuals and organizations to measure, benchmark and act on the opinions that drive success. Our People Powered Data platform enables conversations at scale to deliver impactful customer, employee and market insights to our over 16 million active users globally.
Our widely adopted cloud-based SaaS platform helps individuals and organizations design and distribute surveys that generate an average of more than 20 million answered questions daily across more than 190 countries and territories. Every day our survey platform is used to collect and analyze feedback for a broad range of use cases, such as collecting Net Promoter Score®, or NPS®, data from customers, measuring employee engagement or conducting market research regarding the attributes of a future product offering. Our products drive actionable insights that allow organizations to solve mission-critical business problems, including enhancing customer experience and loyalty, increasing employee productivity and retention and optimizing product and marketing investments.
We believe the success of organizations large and small, for profit and non-profit, depends substantially on their ability to understand the expectations of, and respond effectively to, the feedback of their key constituents. The rise of the internet and the coming of age of the millennial generation have raised the bar for organizations to make informed decisions in the face of rapidly evolving business environments. Businesses that rely solely on intuition and anecdotal experience or traditional market research frequently struggle to anticipate and respond effectively to the evolving needs of their key constituents. Organizations have invested heavily in “Big Data” solutions, which are designed to collect and extract information that provides visibility into the observed behavior of key constituents. However, information from Big Data alone is often insufficient to inform decision making as it fails to capture the human voice. The human voice, captured at scale in real time and in a structured manner is what we refer to as People Powered Data. Big Data captures the “what,” People Powered Data captures the “why.” Understanding the “why” enables organizations to make better decisions that can drive optimal outcomes.
We build products that enable individuals and organizations of all sizes to collect and analyze People Powered Data. Our survey platform is powerful, flexible and easy-to-use, supported by a business model that fosters broad distribution. This has enabled us to democratize access for people to engage with their key constituents. Our survey platform leverages SurveyMonkey Genius, our proprietary, AI-based survey creation assistant, which uses insights extracted from our massive data set to guide and optimize survey creation. For organizations, we offer SurveyMonkey Enterprise, which extends our survey platform with enhanced capabilities, including managed user accounts, enterprise-grade security, customized company branding, sophisticated collaboration capabilities and deep integrations with a broad set of leading software applications.
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To serve the needs of more advanced users in organizations of all sizes and across all industries, we have developed purpose-built solutions to provide enhanced value across three key areas: customers, employees and the markets they serve. These purpose-built solutions incorporate specific workflows, benchmarking data and preconfigured analyses to enhance the value our customers can derive from our solutions.
We have a powerful, capital-efficient, self-serve business model that is fueled by the virality of our survey platform. We believe our brand is synonymous with high quality, easy-to-use products. A study we conducted in 2017 showed that 45% of business users who utilize online survey software consider SurveyMonkey to be their survey platform of choice, nearly double the second most recognized alternative, a lightweight tool, and nearly seven times the third-most recognized alternative, an enterprise feedback software application. The strength of our brand enables us to rapidly and cost-effectively acquire new users through organic online searches, paid online marketing and word-of-mouth referrals. Approximately 80% of our new individual paying users come to us directly through our website or organic online search. See “—Key Business Metric—Paying users” below for the definition of paying user. We augment our self-serve business with a highly targeted, direct selling effort that focuses on organizations of all sizes with an existing base of individual self-serve SurveyMonkey users. We use our proprietary, signal-based system, Customer 360, to analyze usage patterns within our customer base, identify high value opportunities and automatically provide leads to our sales team.
Since our founding, we have attracted an aggregate of over 60 million registered users to our survey platform. Of those registered users, over 16 million users were active within the past year and the remainder were inactive during this period. We have over 600,000 paying users across more than 300,000 organizational domains, including paying users in 98% of the Fortune 500, 71 of which have an organization-level agreement with us and the remainder of which have at least one individual paying user within their organization. Additionally, for the six months ended June 30, 2018, we generated approximately 12% of our revenue from customers that had an organization-level agreement with us, and we had over 2,900 customers with organization-level agreements as of June 30, 2018. See the section titled “Business—Our Customers” for definitions of active user and organizational domain. Based on an internal survey, we believe that over 80% of our paying users utilize our products for business purposes, including small and medium businesses, multinational corporations, educational institutions, government agencies and non-profits.
We have a history of delivering revenue growth. For 2016 and 2017, and for the six months ended June 30, 2017 and 2018, our revenue was $207.3 million, $218.8 million, $106.5 million and $121.2 million, respectively. For 2016 and 2017, our core revenue was $192.1 million and $214.0 million, respectively, representing year-over-year growth of 11.4%, and for the six months ended June 30, 2017 and 2018, our core revenue was $102.1 million and $121.2 million, respectively, representing period-over-period growth of 18.7%.
We have also delivered strong cash flow from operations. For 2016 and 2017, and for the six months ended June 30, 2017 and 2018, we generated cash flow from operations of $35.8 million, $45.0 million, $14.8 million and $22.0 million, respectively. For 2016 and 2017, and for the six months ended June 30, 2017 and 2018, our free cash flow was $(4.9) million, $5.6 million, $(6.7) million and $11.8 million, respectively, which included cash payments for interest on our long-term debt of $19.8 million, $19.9 million, $10.0 million and $10.8 million, respectively, a one-time deferred payment of $7.7 million in the first quarter of 2017 related to our acquisition of TechValidate and $4.3 million in third-party fees related to the refinancing of our credit facilities in the second quarter of 2017.
We incurred net losses of $76.4 million, $24.0 million, $19.1 million and $27.2 million for 2016 and 2017, and for the six months ended June 30, 2017 and 2018, respectively, as we continue to invest in our business to capture our large market opportunity.
Core revenue and free cash flow are not financial measures under U.S. generally accepted accounting principles, or GAAP. See the section titled “Management’s Discussion and Analysis of Financial Condition and
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Results of Operations—Non-GAAP Financial Measures” for explanations of how we calculated these measures and for reconciliations to the most directly comparable GAAP financial measures.
Industry Background
The nature of engagement between organizations and their key constituents is changing
The nature of engagement between organizations and their key constituents is fundamentally changing by becoming more open, bi-directional and frequent. Internet-enabled business models, together with rapidly evolving societal changes have revolutionized constituent expectations for service, speed and experience. These constituents demand that organizations react to their feedback with action and their expectations are continually growing, driven by positive experiences with forward-thinking organizations that listen to their feedback and focus on their needs. Organizations that ignore, misinterpret or react too slowly to feedback risk falling behind the competition.
Organizations need constituent feedback to derive actionable insights for decision making
Big Data has been seen as a way to move business decisions away from being overly reliant on intuition and anecdotal experience. Data about the observed behavior of key constituents are now vital to how businesses run. However, Big Data alone is insufficient to optimize decision making. To make good decisions, organizations need to marry Big Data with People Powered Data so that organizations can see beyond basic trends and better understand the issues on which their key constituents are focused. People Powered Data, coupled with Big Data, can more effectively inform everything from investments to pricing decisions to resource allocations to marketing campaigns.
Employees are increasingly empowered to make decisions
Decision making within organizations has become increasingly decentralized. Employees throughout organizations are directly collecting and analyzing feedback, and the access to information enables more decisions to be made at more levels throughout the organization. This accelerates the operating speed of the organization and increases accountability for decision making at all levels. As this data set is aggregated, organizational leadership is also using these insights to improve organization-wide decision making.
The way technology is adopted, deployed and used is evolving
As organizations become more data-centric at all levels and employees become more empowered, the way technology is adopted, deployed and used is evolving. The initial adoption and purchase of technology within an organization is increasingly being driven by business users who seek the best tools for the job and prioritize products that are intuitive and easy-to-use, accessible to individuals with varying levels of technical sophistication, and conducive to collaboration within teams and across business lines. As technology is increasingly adopted organically within an organization, the IT department often takes notice and determines whether the organization should deploy it more broadly. IT departments require managed user accounts, enterprise-grade security, customized company branding, sophisticated collaboration capabilities and deep integrations with a broad set of leading software applications as they build out suites of best-of-breed SaaS products to power their organizations.
Limitations of Traditional Approaches
Historically, because of the limitations associated with traditional methods of collecting and understanding feedback, many organizations relied on data that were inaccurate, incomplete or no longer relevant, or on their intuition and anecdotal experience. The traditional feedback channels include in-house and outsourced research, enterprise feedback software and lightweight digital tools. Each of these has limited the ability of
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organizations to garner actionable insights from constituents because it is susceptible to one or more of the following limitations:
Requires research expertise
Enterprise feedback software often requires significant expertise and specialized knowledge that business users do not possess. Business users are dependent upon internal or external research specialists to operate these systems. Dependency on specialized resources limits an organization’s ability to rapidly execute on multiple projects and reduces the number of projects an organization can undertake.
Low quality data
Certain data collection practices fail to yield quality insights because they are inherently susceptible to low quality results that can be inaccurate and misleading. Specific sources of inaccuracy include flawed methodology, low response rates and non-representative samples. Even when alternative tools have proper methodology, sufficiently high response rates and a representative sample set to generate meaningful data, they often have limited analytic capabilities, which inhibit the ability to derive actionable insights.
Tradeoff between functionality and usability
Other approaches typically involve a tradeoff between functionality and usability that limits their value to organizations. Enterprise-oriented products that offer functionality such as complex survey creation, sophisticated analytical capabilities and enterprise-grade security typically have a more limited deployment within the organization as they lack the ease-of-use to make them readily accessible to non-technical business users. By contrast, lightweight tools that are accessible to business users generally lack enterprise functionality, yield limited insights and often struggle to deal with complex, large-scale feedback-gathering demanded by organizations.
Expensive and slow
Enterprise software can require significant time and cost to install and deploy and often necessitates professional services for installation, deployment, training and ongoing operational support. The nature of these business models has resulted in usage-based pricing, often making it more difficult for customers to predict and manage costs.
Our Market Opportunity
We estimate the U.S. market opportunity for our People Powered Data platform to be approximately $25 billion, and our worldwide opportunity to be significantly larger. We calculate our U.S. market opportunity by multiplying the total number of U.S. knowledge workers, defined as management, professional and related occupations according to the U.S. Bureau of Labor Statistics, by our annual average revenue per paying user. For the six months ended June 30, 2018, 36% of our revenue was from customers outside of the United States. Further, Gartner estimates, in Gartner Market Databook, 2Q18 Update, 20 July 2018, that the United States will represent approximately 50% of total global software spend in 2018 (calculations performed by SurveyMonkey). Based on this, we believe that our aggregate global opportunity is significantly larger than our U.S. market opportunity.
We believe there is substantial third-party validation for our market opportunity. We address portions of three principal segments of existing software and market research spend: customer experience management, talent management software and market research. MarketsandMarkets estimates that approximately $6 billion
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was spent on customer experience management worldwide in 2017. Technavio estimates the global talent management software spend in 2018 at approximately $7 billion. Based on ESOMAR’s Global Market Research 2017 report, the market research industry in 2016 was $45 billion.
SurveyMonkey
SurveyMonkey is a leading global provider of survey software products.
Powering the Curious
Measure
We empower survey creators to measure constituent feedback. We have designed our products to optimize the quality of constituent feedback and maximize response rates.
Benchmark
We enable survey creators to analyze and benchmark the data they have collected. Our benchmarking capabilities allow our customers to assess constituent feedback accurately and compare themselves to industry, geographic and functional baselines as well as their own past performance and internal trends.
Act
We turn the voice of people into actionable data. Our products enable the filtering and comparing of data by cohort, geography, gender, time period, collection method and more. We help customers weave together data to form a narrative that answers the “why,” which enables them to better understand customer and employee attitudes, predict market appetite and identify meaningful opportunities more quickly.
How We Enable Our Customers
Survey Platform
We offer free basic access to our survey platform for individuals, the majority of whom use it for business purposes. Our basic offering gives users the ability to quickly create and deploy simple surveys. Individuals can upgrade to our paid subscription offerings, which include additional features and functionality such as more complex survey capabilities, an unlimited number of surveys, questions and responses, advanced analytics, branding control, 24/7 support and team collaboration. As surveys are being created, SurveyMonkey Genius guides the process.
SurveyMonkey Enterprise While our products are accessible to individuals with varying levels of technical sophistication, the enterprise-grade version of our survey platform, SurveyMonkey Enterprise, provides enhanced capabilities, including managed user accounts, enterprise-grade security, customized company branding, sophisticated collaboration capabilities and deep integrations with a broad set of leading software applications.
Purpose-Built Solutions We have developed or acquired several purpose-built solutions that extend the power of our survey platform to enhance our value proposition to organizations across three key areas: customers, employees and the markets they serve.
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Customers
SurveyMonkey CX: Our turn-key NPS solution that transforms customer feedback into actionable insights that drive improved decision making and business outcomes.
TechValidate: Our marketing content automation solution that gives users an efficient process to collect customer feedback at scale and then automatically convert it into powerful validated marketing content.
Employees
SurveyMonkey Engage: Our employee-focused solution tracks and measures employee experiences to help organizations attract and retain talent and pinpoint challenging areas before they become problems.
Markets
SurveyMonkey Audience: Our market-focused solution enables organizations to easily gain real-time feedback from millions of qualified panelists, powered by our proprietary panel of more than 1.4 million U.S. consumers and augmented by global partners to reach additional consumers in over 100 countries around the world.
Customer 360
Customer 360 is our proprietary, signal-based system fueled by our data science models that analyzes usage patterns and signals across our entire user base to identify opportunities to convert active users to paying users, upsell organizations to enterprise accounts, expand existing enterprise relationships and cross-sell purpose-built solutions.
Benefits of Our Products
Easy-to-use
We designed our survey platform for broad adoption within and across organizations for virtually any use case. We have revolutionized the feedback gathering process through ease-of-use, broad availability and a delightful user experience, while providing sophisticated analytics tools that provide in-depth feedback analysis to business users without requiring such users to have specialized knowledge or expertise.
Quality of data insights
Our products are used to deliver high-quality insights in real time. Cumulatively, approximately 47 billion questions have been answered on our survey platform which, when coupled with SurveyMonkey Genius, allows us to help survey creators craft their surveys with best practices in question writing and survey structure. Our brand recognition, intuitive user interface, and ease of use across web, mobile and other channels drive strong response rates and accelerate time to respond. Additionally, SurveyMonkey Audience offers survey creators the ability to target representative samples of respondents in the United States and in over 100 countries around the world. Automatically-generated reports and customizable charts can be shared broadly throughout an organization, enabling insightful data to be acted upon and driving more effective decision making.
Scalable, flexible and robust
We have developed a suite of products that are flexible across use cases and scalable across organizations of all sizes. While our survey platform is intuitive, easy-to-use and accessible without implementation, professional services or training, it is also designed to meet the requirements of the most stringent enterprises.
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Rapid time to value and strong return on investment
Our intuitive products require minimal time to implement and deploy, empowering users to gain actionable insights quickly and while they are still relevant. Our products seamlessly integrate with software and application partners, such as Salesforce, Marketo, Oracle, Microsoft, Google and Slack, enabling users to distribute surveys across multiple channels to reach respondents wherever they are and to embed People Powered Data directly into their existing systems of record. Our products can be deployed without implementation, professional services or training. We offer user-based pricing for our survey platform, which gives organizations cost visibility and predictability.