IDAHO DEAL FLOW REPORT
We are pleased to present the 2020 Idaho Deal Flow Report. This is our seventh annual report, showcasing many of the companies that are starting, growing, and thriving in Idaho. Even with the challenges presented during the COVID-19 pandemic, there were 151 deals with over $5.2 billion of capital flow. The report confirms that Idaho continues to experience rapid growth and is one of the best places in the country to live and grow a business.
The Deal Flow Report presents capital flow throughout the state, highlighting businesses, capital providers, and supporting organizations. The data collected shows the resilience of the Idaho economy and adaptability of local entrepreneurs. We continue to see population growth across the state, which drives a burgeoning talent pool. Idaho’s growing talent gives us confidence that our state will continue to be fertile ground for entrepreneurs and startups. 2020 was a particularly exciting year with multiple high-value deals spanning a variety of industries: Ericsson’s $1.1 billion dollar of Cradlepoint in the Technology/Software industry, Albertsons $1.7 billion funding and IPO in the Consumer/Retail space, and Vacasa’s exciting $108 million venture round in the Services industry.
This year was proof that Idaho has what it takes to build, grow, and reinvest in the local ecosystem, and shows that investors—both in and out of Idaho—are eager to invest in Idaho businesses. This report is published to shed light on the many versatile, strong entrepreneurs and businesses here in our state. We are confident that Idaho will adapt to the new landscape in 2021, and we are excited to see what new innovations local founders bring to the marketplace.
Capital Connect + Deal Flow Committee
Co-chair, Alturas Capital
Co-chair, Holland & Hart, LLP
Idaho Technology Council
Idaho Technology Council
Holland & Hart, LLP
Alturas Capital Intern
Alturas Capital Intern
Blake J. Hansen
Alturas Capital, LLC
Deal Flow Co-Chair
Alison G. Johnson
Holland & Hart LLP
Deal Flow Co-Chair
It is an honor for me to introduce the 2020 Idaho Deal Flow Report, a publication we eagerly await every year because it spotlights many of the industries flourishing in Idaho along with their investment partners.
When the COVID-19 pandemic began at the start of 2020, no one knew what to expect. But together, Idahoans worked to protect our loved ones and our economy, and the hard work paid off. Idaho has the strongest economy in the nation, and we are poised for even more prosperity in the months and years ahead!
Idaho’s success is demonstrated in the strength of our technology sector. Despite the pandemic, Idaho experienced another year of growth. The market continues to recognize the innovation of our entrepreneurs and mature companies are getting bought and sold. The acquisition of homegrown Cradlepoint in 2020 is a great story of an Idaho startup experiencing a billion-dollar exit.
For those who have called Idaho home for years – and for many of us, a lifetime – it is no wonder companies and people from other parts of the country and the world are choosing the Gem State to invest, do business, and live life. Our communities share in the excitement of an entrepreneur starting a business. We root for innovation and investment in our existing businesses, large and small. We extend open arms to anyone wishing to come here from somewhere else to retire, raise their families, or expand or relocate a business.
I appreciate the Idaho Technology Council and all the volunteers and organizers for contributing to the 2020 Idaho Deal Flow Report. You have put together a resource that summarizes trends in business activity and identifies where we excel and where can improve.
Together we will remain intently focused on public policies that support economic growth and prosperity because the next generation of Idahoans need the same kind of job opportunities in Idaho that they can find in large cities. With your help, we will continue to make Idaho the place our children and grandchildren want to stay.
Governor of Idaho
DEAL FLOW SNAPSHOT
BIGGEST DEALS OF 2020
Mergers + Acquisitions
DEAL FLOW FINDINGS + DATA
Despite COVID-19, Idaho experienced another great year of growth. There were 151 deals that accounted for $5.2 billion in capital flow. While the number of deals was nearly identical to last year, there was almost $800 million more in capital flow. This points to an increase in the size of each deal and, that despite COVID-19, startups are getting funded and mature companies are getting bought and sold.
Only one company pursued an IPO last year, but it was an exciting start to a new chapter for Albertsons. In June of 2020, just as the COVID-19 pandemic was raging, Albertsons went public. Check out our conversation with former Vice President Andy Scoggin.
A Conversation with Andy Scoggin, former Executive Vice President
While the company has recently experienced growth and success, it has been years in the making.
Built In Idaho had the opportunity to sit down with former Executive Vice President Andy Scoggin to discuss the 2006 restructuring, and how Albertsons, its employees, management, and customers put the company on path to go public.
What was your role at the company and what challenges did the company face during this era?
I worked my way up in the ranks of Albertsons Inc. from the time I joined in 1993 through the dissolution of the company in 2006. During this time, the company executed a pretty aggressive growth plan through organic growth and acquisition. While we did acquire several great companies, one of the challenges was the additional strain that executing multiple integrations at the same time put on the company. Most of the companies that Albertsons Inc. acquired had different systems in place whether it was POS, supply chain management, or something else. And, culture integration was often the most challenging factor. So that put stress on Albertsons as did the additional debt of acquisition. While there were many reasons that led to the dissolution of the company and sale to Cerberus and SuperValu, among others, the challenges of integration and debt were two big drivers.
What was the situation when you stepped into your role with Albertsons LLC, the company formed by the Cerebrus led private equity group to acquire the underperforming Albertsons stores?
Others thought that the stores your group acquired were past the point of no return; what did you see and how did you make it successful?
The stores we acquired were primed for success, they just had not been given the opportunity. In total, it was about 650 stores spread throughout the U.S. from Florida to Texas, Louisiana, Arizona, Colorado, among others. All but one of these stores were Albertsons stores prior to our acquisition which means they had good systems and processes, and some of the best employees you could find. The real drawback, was that these individuals had not been given the capital or incentive structure to capture opportunity and find success.
Cerberus first recruited Bob Miller, who was in retirement but had spent the first thirty years of his career with Albertsons rising to the position of Executive Vice President of Operations before leaving to take the position CEO of Fred Meyer and later Rite Aid. Bob is one of the most respected leaders in retail grocery, but more importantly, he was trusted by our employees and cared deeply about their success and for them as people. If we had not had Bob, it would have been incredibly difficult to do what we did.
In addition to Bob, we also brought in industry veterans and promoted from within to elevate those who demonstrated leadership, vision, and care for their employees and colleagues. These divisional presidents and Bob helped realize the untapped potential of our stores and employees.
The key to our success were our employees. What we did as a management team was give our regional divisions independence by trusting their judgement in local markets and decentralize the decision-making process. We also set ambitious goals focused on EBITDA and sales targets that helped to motivate the divisions to exceed expectations.
Albertsons: An Idaho Company through the Decades
Founder Joe Albertson opens the first Albertsons at 16th and State streets in Boise.
Albertsons opens its then-largest store – 60,000 square feet, featuring both a food and a drugstore.
Albertsons celebrates 25 years and enters Southern California by acquiring a 14-store chain. Albertsons becomes the 25th largest grocer in the United States, with 127 stores and more than 5,000 employees.
Sales top the $1 billion mark for the first time, and Albertsons has more than 16,000 employees across 250 stores.
The 1,000th Albertsons store opens at 3614 W. State in Boise. The 1,000th store is a one-stop shop: Customers can use banking services, pick up dry cleaning, grab dinner or file a police report.
Albertsons completes the merger with American Stores company in June, making it one of the top three grocers in the nation.
Albertsons LLC is formed from acquiring 660 Albertsons stores, following the divestiture of Albertson’s Inc. to three separate buyers.
ACME Markets, Jewel-Osco, Shaws, Star Markets, and the balance of Albertsons stores are sold to SuperValu.
Albertsons LLC successfully acquires all of the remaining assets purchased by SuperValu in 2006, re-establishes the corporate headquarters in Boise.
Albertsons and Safeway Complete Merger Transaction; The newly combined private company will operate 2,200 grocery stores in 33 states and the District of Columbia.
Albertsons Companies, Inc. completed its initial public offering on the New York Stock Exchange under the ticker symbol of ACI.
How did the management team approach the rebuilding?
After getting things stabilized in the first 5-6 years, we decided to sell off some of our stores to really focus in on our true value drivers. This put us in a stronger position to go after the stores that SuperValu was looking to offload in 2013. Even though SuperValu got the ‘better’ stores back in the mid-2000s, they struggled to maintain profitability which gave Albertsons LLC the opportunity to buy them back which we did in 2013. In just three months, we took those stores positive in sales.
This positioned us well to make a move on Safeway when they started exploring a sale in 2014-2015. In acquiring the Supervalu stores and the Safeway chain, Albertsons LLC grew rapidly from 20,000 employees, 192 stores, and $4 billion in revenue to 250,000 employees, 2,000 stores, and over $60 billion in revenue. These acquisitions put Albertsons, which we renamed as Albertsons Companies, on the path to our public offering.
Most importantly, we didn’t change the way we managed even when we acquired these companies. We had to change some of the processes and systems, but our values of independence, decentralization, decomplication, trust, and rewarding our people never changed.
“The key to our success were our employees. What we did as a management team was give our regional divisions independence by trusting their judgement in local markets and decentralize the decision-making process.”
— ANDY SCOGGINS, FORMER EXECUTIVE VICE PRESIDENT
How did Albertsons get to the point where going public made sense?
We, of course, were thinking about going public for many years, but we really started to think about the possibility of going public after our acquisition and integration of Safeway. As many know, we were in negotiations to acquire Rite Aid in 2018 which would have brought Albertsons public through acquisition. That didn’t pan out, but it put us in a position to work with Apollo Global Management in 2020 which did ultimately lead us to the public market.
The partnership with Apollo really brought two main things to Albertsons: a highly reputable investor demonstrating confidence in the company and an established valuation of the company that positioned us for our IPO.
What impact do you think Albertsons going public had on Boise and Idaho?
Albertsons going public means that the company is more stable and more likely to stay headquartered in Boise. Albertsons also has more capital behind it now which makes it a more active player in the M&A space, which will help local startups and companies find success. And, in my opinion, one of the greatest benefits of Albertsons going public is the benefit to employees who can now be incentivized with liquid equity – something they didn’t previously have as an option.
What advice would you have for smaller businesses and entrepreneurs?
- Keep decision making as close to the customer as possible
- Make life as uncomplicated for employees as possible (focus on what they need to do)
- Trust those around you and get out of the way
- Give them enough capital to do what you want
- Never lose sight of what your capital is buying
- Don’t spend money on things you don’t need to!
Private placements led the count with 86 deals. Of those publicly available, most of these deals were in the Seed/Angel category at 43, which shows a strong number of early-stage companies gaining traction throughout Idaho.
Not only are early-stage companies gaining traction, but early-stage companies are also raising significant equity rounds propelling them into the next level. There were five Series A, nine Series B, and two Series C+ funding rounds.
Two Series A rounds that caught our attention were Proud Source Water and Tackle.io. Proud Source expanded nationally with a production facility in Florida while Tackle.io closed their Series A in June 2020, then closed a $35 million Series B in March of 2021.
Private Placements by Industry
Materials & Resources and Consumer & Retail account for 15 deals each. Materials & Resources were spread evenly from Seed/Angel through Series C+ indicating that the industry is seeing success from startup to maturity. Consumer & Retail saw 6 deals in Seed/Angel while the remaining classified deals were Series B (2) or Growth Equity (3). These deals were largely associated with Albertsons as it prepared for its IPO.
The remaining industries accounted for the remaining 26 private placements with 12 Seed/Angel rounds, 2 Series Bs, and one Series C+ with the remaining deals unclassified. These industries, while experiencing fewer deals, did see significant investment in early-stage companies which may appear in future deal flows with follow on funding rounds.
Iron Mule, Inc.
The History of Iron Mule, Inc.
Iron Mule, Inc. is the product of two formerly independent, Boise-based coffee companies: Ironside Roasting Co. and Café Mulé. These wholesale focused companies merged in 2018, and founders Matt Bishop and Colin Seeley decided to continue selling roasted coffee under the separate brands they had originally founded. Taking that a step further, in late-2019 they began plotting the launch of a third major brand, one that might address a number of challenges both for them as a company and for the smallholder farmers from whom they source specialty coffee.
Direct Access – Coffee Reimagined
Direct Access is the brand they decided to pioneer as the new flagship for their company. They realized that small “local” coffee roasters often saturate the market in their immediate area but fail to implement a strategy to achieve meaningful scale. To address this, Seeley and Bishop decided from day one that Direct Access needed to target growing customer demand and have a strategy to achieve national scale. They chose to focus on the rapidly growing specialty and single-origin coffee market while providing a unique value proposition through a strong social mission. Seeley and Bishop also recognized that many craft roasters price themselves out of the market, setting prices so high that they can only sell online and severely limiting their potential scale. For that reason, they decided to pursue a grocery first strategy, offering a premium yet affordable coffee for conscientious consumers.
A New Model – Disrupting the Supply Chain
A significant differentiator for Direct Access coffee is its disruptive new supply chain model that provides better returns to smallholder farmers. Typically, coffee is purchased from farmers for low prices, dictated by a highly volatile commodity market. Over 45-years, commodity prices for coffee have not appreciated, while farm-level inputs have risen greatly. This dynamic is squeezing farmers. While margins are getting ever smaller at the farm, the retail price of premium coffees continues to rise. Realizing these dynamics, Seeley and Bishop engineered a way for small farmers to maintain ownership of their coffee until it is sold to the end consumer. They are doing this by harnessing the power of development minded financiers who are willing to lend to small farmers.
In turn, farmers hire the Iron Mule team to operate a vertically integrated supply chain on their behalf and get the product on shelves under the Direct Access brand. The Iron Mule team turns a profit as a service provider. And importantly, participating farmers can pin their financial outcome to a steady and relatively robust retail price rather than being subjected to the whims of the commodity market. For farmers, it is the difference of consistently positive returns with Direct Access or the prospect of marginal returns and years of being under water with the traditional coffee trade.
One of the most important items that the Iron Mule team realized they would need to be successful in their launch of Direct Access was outside funding. A company needs to be well capitalized to launch and support products with major grocers such as Whole Foods or Target. Within the coffee space, the competitive nature of online direct-to-consumer sales has similar requirements for marketing spend. To meet their immediate needs, the Iron Mule team opened up a convertible note in spring 2020. To date, they have closed $540,000 of this seed round, closing out the round that originated from accredited investors in Idaho. Bishop and Seeley believe they will need $4.5 Million in outside funding over three years to scale nationally in multiple grocery banners and anticipate a future Series A and Series B round of funding.
Tackle’s focused strategy has been evident from the beginning of the tech company’s swift 4-year lifespan. Founded in 2016, Tackle’s Cloud Marketplace Platform allows software companies to optimize the Cloud Marketplace experience to list, market, and sell quickly, easily, and cost-effectively. The company has helped hundreds of software providers accelerate revenue through Cloud Marketplaces like AWS, Azure, and Google Cloud, all with zero engineering resources required.
Due to the recent shift in remote work across the globe, 80% of a typical software provider’s sales cycle has moved to digital environments. This caused many companies to host their applications on the public clouds like AWS, Azure, and Google Cloud and also enable their workforce to access cloud-based applications. Tackle has been fortunate to see rapid tailwinds due to this shift over the last 12 months.
Tackle shared some insights on doing business in Idaho and their recent Series B round:
What makes Idaho a great place to do business?
Other local entrepreneurs in Boise have been incredibly helpful and supportive as Tackle has grown. The tech scene here is much more tight-knit than many other cities, and we love collaborating with others who share our values. The biggest testament to the Boise startup scene is that we’ve had a handful of folks we hired in other cities around the country who have decided to move their families here after just visiting once or twice. That isn’t something that happens in most other cities, and it is something that will only become more common as major tech companies continue to embrace remote work.
“This investment from Andreessen Horowitz and Bessemer Venture Partners is an enormous validation of the impact Tackle has had on the Marketplace purchasing experience. We’ll continue to make it painless for sellers to get started without the need for developers so they can focus on innovating on their own products. Our vision remains to revolutionize the way software is bought and sold, and this funding will rapidly accelerate our ability to deliver on that.”
— JOHN JAHNKE, CEO
How did the Series A round lay the foundation for the most recent Series B round?
We actually have not spent any of the money from our Series A round as we doubled our customer count and tripled revenue in 2020. Given there is so much demand for our Cloud Marketplace Platform, we saw the Series B as an opportunity to accelerate the execution of our ambitious product roadmap to further help software companies sell through Marketplaces. Our partners, Andreessen Horowitz and Bessemer Venture Partners, are perfectly aligned with our mission to give the software industry the ideal platform to establish, generate, and scale revenue through the cloud.
Tackle.io’s Cloud Marketplace Platform Dashboard
What will the funds be used for and what has it allowed Tackle to do that it would not have been able to otherwise?
In general, our philosophy has always been to keep the company very well-capitalized, to give us options as we scale so we can make the right decisions for the company and our customers. This new capital enables us to accelerate our investment in meeting market demand for our products and platform. We are constantly evaluating investment decisions and prioritizing on the next best investment for Tackle to make. We want these decisions to be logical, easy for our existing customers to consume, and for our existing team to support. While we see an enormous opportunity to build, we need to keep this simple, logical expansion thinking in mind and take calculated expansion bets as we scale. One of our main priorities is to scale our talent to accommodate our new timeline. We started this year with 56 employees, and our plan for 2021 is to grow to approximately 120 employees.
We’re excited to continue innovating our platform, bring exciting new things to the industry, and hire top talent from across Idaho and the U.S. to make it all possible.