Software. Only 4 companies showed real YOY drops during the recession and as a group, there was no quarter where median growth fell YOY. Calidus Cloud performed the worst, but their story was about transitioning from a services & license business model to subscription. Additionally, they were doing shorter and less expensive on-demand implementations, which they knew would shrink service revenue. Adobe was also undergoing shifts in business model for some of their segments, specifically “platform revenue.” Setting aside these underperformers, it’s remarkable to see companies like LivePerson, LogMeIn, Salesforce, and Ultimate Software grow straight through the recession.
Marketplaces. Travel sites Priceline and Expedia also did very well. One would expect these sites to take a big hit, but Priceline grew through the recession and Expedia’s hits were pretty slight (less than 10% YOY decline). Also, Groupon’s growth isn’t a typo; the recession is probably the best thing that could have happened for the couponing business.
Google & Netflix. No surprise that these bellwethers in their respective industries saw no declines. During a recession, customers consolidate their dollars to the best in breed players where they perceive value.
TakeTwo. TakeTwo got absolutely crushed, but before you assuming gaming doesn’t do well in recessions, note that Q2 2008 results included significant sales of Grand Theft Auto 4, which launched at the end of Q2 of 2008.
E-commerce performed. As a group, median revenue declined only 9% YOY which happened in Q4 2008. While 1800 Flowers did pretty poorly, Amazon and Shutterfly grew through the recessions, eBay declined only nominally (-8% was the worst YOY quarter), and Overstock also did well. BlueNile took a big hit in Q4 2008, but improved after that quarter.
Apple & Garmin. Apple grew through the recession as iPhone sales caught fire. Garmin had a pretty rough go, but that may be due to the Map app on iPhone as much as the recession.
Overall takeaways. Software is very resilient, largely thanks to annual contracted revenue. Best of breed companies also showed fantastic performance (Google, Netflix), as did companies that help customers save money (Expedia, Priceline, Amazon, eBay, Groupon, Blue Nile). Keep in mind, this was the worst recession since 1929; YOY GDP growth fell an unprecedented 8% in Q4 2008, 9 million jobs were lost, the unemployment rate surpassed 10%, and nearly 10 million homes were foreclosed on. Even during these 6 quarters of recession, tech did pretty well.
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