Google Capital Backs Public Firm Care.com as Investment Lines Blur
[Corrected 6/30/16, 2:49 p.m. See below.] Google Capital’s $46.35 million investment in publicly traded Care.com, announced Wednesday, marked a departure from the firm’s usual bets on late-stage private companies and illustrated how the traditional lines in the venture capital world are being redrawn.
Care.com (NYSE: CRCM) is the first investment in a public firm by Google Capital, the three-year-old growth equity fund backed by Google parent company Alphabet (NASDAQ: GOOGL). The fund’s previous investments include Palo Alto, CA-based SurveyMonkey, New York-based FanDuel, and Wisconsin Rapids, WI-based Renaissance Learning. Based in Waltham, MA, Care.com runs an online marketplace for hiring caregivers for children, seniors, pets, homes, and more.
Google Capital isn’t the only tech investment firm branching out into deals for public companies. Silver Lake has also done this, the New York Times pointed out. The reverse has been happening as well, with public-company investors pouring money into late-stage private companies.
This week’s deal makes Google Capital the largest shareholder in Care.com. Google Capital bought newly authorized convertible preferred stock at an initial conversion price of $10.50 per share, a 24 percent premium to Care.com’s closing stock price of $8.47 on Wednesday, when the deal was announced. Google Capital partner Laela Sturdy will join Care.com’s board.
Care.com says it will use its newfound cash to invest in its business and to finance a $30.5 million repurchase of 3.7 million shares from Matrix Partners, one of its early backers, at a price of $8.25 per share.
Care.com CEO Sheila Lirio Marcelo (pictured above) founded the company in 2006 after working as an entrepreneur-in-residence at Matrix. With the help of about $110 million in private investment money, she grew the company to more than $81 million in annual sales by the end of 2013. Care.com went public the next year, raising about $91 million in its January IPO. It generated $138.7 million in sales last year and turned a profit in each of the past two quarters. [An earlier version of this paragraph incorrectly stated that Care.com is unprofitable. We regret the error.]
The company’s stock traded above $20 per share for most of its first month on the public exchanges, but by late July of 2014 it dipped below $10 and steadily declined to around $5 last fall. The stock has rallied some this year. The Google Capital news boosted it to above $11 this morning. It also bumped Care.com’s market value from $276 million to more than $380 million, as of this writing.
Care.com says 11 million families and 8.6 million caregivers in 16 countries use its website, as well as 800,000 employees of corporate clients. Google is one of them.
“Google Capital is excited to support Care.com in building on their market leadership by giving them access to our biggest asset—some of the world’s leading experts in a range of topics at Google and Alphabet—as they continue to deliver delightful and seamless solutions to consumers and enterprises,” Sturdy said in a prepared statement.