Sequoia Investment in San Diego’s Service-Now.com Provides a Big Holiday Payout
It’s going to be a Merry Christmas this year for many employees at suburban San Diego-based Service-now.com, a privately held company that was founded in the aftermath of the corporate accounting scandal at San Diego’s Peregrine Systems. Perhaps merrier for some more than others.
In a regulatory filing submitted yesterday, Service-now.com discloses that it has raised almost $41.4 million in a venture round that intends to raise more than $66.1 million. Andy Chedrick, the company’s chief financial officer, tells me the entire $66.1 million investment is intended as an opportunity for all of Service-now.com’s 133 employees and founders to cash out some of their founders’ shares by selling them to Menlo Park, CA-based Sequoia Capital.
“We don’t need the round to fund our operations,” Chedrick says. “We’ve been cash-flow positive for 30 months, and we’ve been doing well.” The CFO says Service-Now.com has been doubling its revenue “year after year” and the venture round gives employees who have stock options the “ability to capitalize on their compensation.”
It wasn’t disclosed in the filing, but Chedrick tells me the investment was made by Sequoia, the venture firm renowned for its cagey investments in Google, YouTube, Cisco Systems, and others. Sequoia identifies Douglas Leone and Patrick Grady on its website as the partners who are overseeing the firm’s investment, and Leone is on Service-now’s board of directors.
But the regulatory filing also includes an unusually precise—and eyebrow-raising—notation that says: “$37,642,785.94 of the gross proceeds of the offering have been used to repurchase shares of the Company’s Common Stock held by Frederic B. Luddy, the Company’s President, CEO and director, and Andrew J. Chedrick, the Company’s CFO.”
Here at Xconomy, we have learned the hard way that the sparse information that a startup provides in a Form D filing doesn’t necessarily tell the whole story. But Chedrick refused to comment when I asked directly if the notation accurately shows a $37.6 million payout for Service-now’s CEO and CFO. Taken at face value (and with no other interpretation offered), the notation says the CEO and CFO are collecting nearly 57 percent of the $66.1 million round—or nearly 91 percent of the capital raised so far.
Nevertheless, as the Securities and Exchange Commission explains, “Form D is a brief notice that includes the names and addresses of the company’s owners and stock promoters, but contains little other information about the company.”