One of the unsung heroes among Web startups is SurveyMonkey, the company that offers online surveys. Today, it is announcing a very large round of senior debt financing: $100 million from a syndicate led by Bank of America Merrill Lynch and SunTrust Robinson Humphrey. Survey monkey never really took traditional venture capital. Last year, it raised an undisclosed sum from private equity firms Bain Capital Ventures and Spectrum Equity Investors, which was really a leveraged buyout of most of the founders’ shares. The proceeds of this debt financing will be used to retire the company’s current debt and replace it with new debt at a much lower interest rate, as well as for future acquisitions.
The service has been growing like a weed and currently 25 million people a month respond to those surveys. Most of those don’t pay, but Survey Monkey upsells customers to paid plans with more bells and whistles and which allows for more surveys. Earlier this year, it acquired Precision Polling, a phone survey startup.
SurveyMonkey is a very high margin business, with revenues rumored to be above $50 million a year. Basic surveys are free, but if customers want branded surveys or unlimited questions and responses, they have to pay up to $20 a month. It is a classic freemium business model, and it is disrupting the current market research industry. Instead of paying tens of thousands of dollars for market research, employee surveys, and other types of feedback, enterprises can get unlimited surveys for $200 a year. SurveyMonkey appears to be doing quite well based on the fact that it went for debt financing, which is easier to do with strong cash-flow businesses. The company now has 75 employee, up from 14 in April, 2009.
When asked for details on how much money SurveyMonkey is making, CEO David Goldberg declines to offer up specifics. “We don’t want people dumping a lot of money into the space,” he says.