Illuminate Ventures’ Cindy Padnos

From our Women's PE Briefs - week commencing March 15, 2021

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SoftBank Vision Fund has garnered attention for the returns it could generate as a result Coupang, Inc.’s initial public offering – the largest by a foreign company in the United States since Alibaba’s seven years ago. After all, SoftBank, with Lydia Jett helping to lead the effort, invested $3 billion for a 33 percent stake in the South Korean e-commerce company, a stake that was worth $16 billion at the IPO after Coupang was valued at $60 billion.

But the IPO also stands to be a significant event for a much smaller firm: Illuminate Ventures, which is guided by founder Cindy Padnos and partner Jennifer Savage. With Coupang now public, Illuminate and its limited partners are poised to see a sizable payoff. “We never ‘count chickens until they hatch’,” Cindy tells Women’s PE Briefs. “But at the IPO offering price of $35 a share, the return to Illuminate will be more than 15 times of our invested capital out of both our Spotlight Fund and Fund I. Of course, our holdings will be restricted initially, but we are confident about their future.”

Illuminate did not invest directly in Coupang. Rather, it came to own shares in the South Korean e-commerce company as a result of having a portfolio company – CalmSea – acquired by Coupang in 2014. Coupang’s founder and CEO, Jim Dai, had been vice president of engineering at Vivant, a software company that Cindy had founded and led. As a result, Illuminate co-led CalmSea’s 2013 seed round along with Altos Ventures. A predictive analytics platform, CalmSea was utilized by online and cross-channel retailers to optimize their marketing programs. Coupang, said Cindy, was one of CalmSea’s largest customers and “was seeing tremendous value from using their product.” Coupang’s acquisition came about after CalmSea received an offer to be acquired by a publicly traded company, said Cindy. Learning about the potential deal, Coupang’s CEO “jumped in to make a better offer,” she said. This included appointing Dai, CalmSea’s CEO, as chief technology officer of all of Coupang and his co-founder as head of products. If the public company had acquired CalmSea, it would have been a “reasonably nice/quick all-cash exit,” said Cindy. But, she said, “we all saw the potential of Coupang – then generating about $500 million in top-line revenue – and accepted their offer. We felt that, in effect, we were doubling down on the talented team we had originally funded, since they were taking such high-impact roles in the combined company. It was a critical time in Coupang’s young life as they had decided to move from a Groupon-like model to be the Amazon of Korea. We knew our team could help them operationalize that vision. As a result of that acquisition, we also introduced an individual from our network who had recently retired from Amazon as senior vice president of worldwide operations who joined Coupang as a board member. Shortly after the merger, Sequoia made its investment, later followed by SoftBank and BlackRock.”

CalmSea, according to Crunchbase, raised only $2.2 million in funding prior to its acquisition. Cindy adds that “there were many signals along the way that Coupang was a special company.” She said that at the time of the acquisition offer, “we came to understand how unique the Korean market is and how well suited it is for massive e-commerce adoption. They were already the fifth largest e-commerce market in the world and have attributes that make it more attractive for a disrupter like Coupang.” The country, she said, had only very little offline retail store presence. There was, for instance, no Korean version of Sears, or PetSmart or Home Depot. The Korean population also is very concentrated in a few major cities, “facilitating cost-effective, rapid delivery opportunities,” she said. CalmSea’s investors also learned that “Coupang had exceptional levels of consumer satisfaction that have led to very strong ‘existing customer’ revenue growth, she said. “We became aware of the value of this ‘same customer growth’ phenomena very soon after the merger when we saw how little they needed to invest in marketing – less than 1 percent of revenue – to grow their revenues by as much as 50 to 70 percent annually.”

Coupang is Illuminate’s first initial public offering since Xactly went public on the New York Stock Exchange in 2016. Cindy served on the company’s board for more than 10 years and chaired its compensation committee at the time of the IPO. Xactly was acquired in 2017 by Vista for more than $500 million. Coupang marks Illuminate’s second liquidity event in the past week. Hoopla, a performance management and motivation platform, was purchased by venture-backed Raydiant, a developer of a digital experience platform. Terms were not disclosed. Illuminate first invested in Carlsbad, Calif.-based Hoopla in 2011.

Oakland, Calif.-based Illuminate focuses on Series Seed stage investments the B2B/enterprise software space. The firm’s investments in 2020 included Joinder, a collaborative work platform designed for corporate legal departments and all of their internal and external constituents, and nFlux, an intelligent video analytics platform that automates the process of learning and generating contextual insights from the unstructured data inside video footage in real time.

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