Sprout Social filed to go public Friday, making it just the second Chicago tech company to file for an IPO since Grubhub went public five years ago.
The social media management startup, founded in 2010, said in an S-1 filing with the Securities and Exchange Commission that it expects to raise $100 million, though that number is typically used as a placeholder and is likely to change.
Sprout says it has more than 23,000 customers across 100 countries. It did $44.8 million in revenue in 2017 and $78.8 million in 2018. Through Sept. 30 of 2019, Sprout reported $74.6 million in revenue.
While the company has grown quickly over the years, it remains unprofitable. It generated net losses of $21.9 million in 2017 and $20.9 million in 2018. Through the first nine months of 2019, its net losses were $21 million. Sprout said in the filing that it has never achieved profitability on an annual or quarterly basis.
The company said it generated over $100 million in total annualized recurring revenue (ARR) as of Sept. 30. ARR is a metric used by software companies to calculate the amount of recurring subscription revenue they can expect on an annualized basis. It's an important metric for Sprout, which generates the majority of its revenue through subscriptions from companies who use its software to manage their Facebook, Twitter, LinkedIn and other social media channels.
Sprout said in the IPO filing that the potential market for its product is a $13 billion opportunity in the U.S., and with just 30% of its revenue coming from international customers, Sprout believes the opportunity outside the U.S. "is at least as large."
Sprout raised $111.5 million in venture funding to date. Chicago VC firm Lightbank, founded by Groupon founders Eric Lefkofsky and Brad Keywell, led the startup's Series A round and was the first outside money in Sprout. The startup is also backed NEA, Goldman Sachs, and Future Fund, an Australian sovereign wealth fund. Future Fund led Sprout's most recent $40.5 million round, which valued the company at around $800 million.
A successful IPO for Sprout would be a win for Chicago's tech ecosystem, as tech IPOs have been a rare occurrence in the city. Sprout, which has grown to 500 employees, is just the second company to test the public market since Grubhub went public in 2014. The other was Motorola spin-off Cambium Networks, which went public earlier this year.
Sprout's filing comes at a tumultuous time for tech IPOs, as co-working giant WeWork pulled its plans for a public offering after its S-1 revealed mounting losses and an unclear path to profitability. Uber's stock is down more than 25% from its IPO price in May, and Lyft is down more than 50% from its day-one highs.
