Data Sheet—SurveyMonkey Has Some Sizzle, But Where Are the Profits?

Only in Silicon Valley would a highly-indebted, 19-year-old company that loses oodles of money attempt to go public on the strength of a less-than stellar track record.

But for the debt part, it’s a normal story. Decent revenue growth, generous employee stock compensation, and high administrative costs all describe SurveyMonkey, the pioneering “freemium” software company that supplies surveys and analytical tools to individuals and businesses. But SurveyMonkey also sports a balance sheet that is long on debt—$317 million, about $100 million more than it had in revenue last year—and short on cash, $43 million at last count. (It raised debt years ago to delay its IPO and for growth.) Because of the service on that debt, SurveyMonkey loses money, $24 million last year, and it wouldn’t have made much if it didn’t have the interest expense. (It plans to use the IPO money to pay down debt.)

For all that, SurveyMonkey’s IPO will get a lot of attention. For years it was at the vanguard of giving away tastes of its product to the masses and upselling and cross-selling fuller meals to the well heeled. Of the 60 million users who have signed up for SurveyMonkey, 16 million are active and 600,000 pay, according to the company’s S-1 filing. And SurveyMonkey isn’t exactly on fire: Revenue growth in 2017 was a tad under 6%. (The company’s revenue growth rate excluding a discontinued product line was faster.)

The not-so-young company has some sizzle to it. Its largest shareholder is Facebook honcho Sheryl Sandberg, whose late husband, Dave Goldberg, was SurveyMonkey’s CEO before his untimely death three years ago. (I counted him as a friend and remembered him here.) Sandberg is on the company’s board, as is tennis great Serena Williams. The company is a good marketer too: It forms partnerships with many media companies, including Fortune, which used SurveyMonkey to query attendees of its Brainstorm Tech conference in Aspen.

You’d think after nearly two decades a company with tons of talent and an impressive product could make money. The truth is, that’s harder than it looks.

NEWSWORTHY

Take the wheel. Self-driving car technology may be getting a bad rap when it comes to safety. In a study covering autonomous driving road incidents in California from 2014 to 2018, Axios found 38 moving accidents with the software in control. All but one were the fault of humans. And 24 accidents while self-driving cars were stopped were all due to humans. Meanwhile, vacuum maker Dyson expanded its efforts to build electric cars, outlining plans to build an engineering and testing site. “We are now firmly focused on the next stage of our automotive project strengthening our credentials," CEO Jim Rowan said.

Windshield visions. With growing rumors of its virtual and augmented reality efforts, Apple acquired startup Akonia Holographics, which is at the cutting edge of goggle display technology. Apple is reportedly aiming for a 2020 launch of a super high resolution headset.

The road ahead. Some fans of Sen. John McCain are pushing to have the Russell Senate Office Building renamed for him. An enterprising McCain devotee didn't wait for the debate to play out—they renamed the building on Google Maps. Google quickly undid the unofficial name change.

Busy intersection. Diversity expert Verna Myers joined Netflix on Wednesday in the newly created position of vice president of inclusion strategy. The hiring of Myers, who wrote the books Moving Diversity Forward and What if I Say the Wrong Thing?, follows the firing two months ago of communications head Jonathan Friedland for using a racial slur in meetings.

Nipped at the line. Apple may have been first to grab the $1 trillion stock market value crown, but Amazon is close behind. Jeff Bezos's baby closed trading on Wednesday at $1,998.10 giving it a market cap of $972 billion, according to Google Finance.

Traffic crawl. Also on Wall Street, Salesforce reported that its second quarter revenue jumped 27% to $3.3 billion and adjusted earnings per share almost doubled to 71 cents. Both were better than Wall Street expected but a weaker-than-expected forecast for the next quarter disappointed, and Salesforce shares slipped 3% in premarket trading on Thursday.

Dropping out of the race. Don't get me started on the politics of bond rating agencies, but the internecine spats can get vicious. So it's probably not surprising that after WeWork did not pay to be rated by Moody's Investors Service, the agency issued an unsolicited rating on the startup's super-popular bond deal in April. On Wednesday, Moody's withdrew its rating (B3, deep into junk bond territory and lower than ratings assigned by S&P and Fitch) citing a lack of data from the company. WeWork's bonds, by the way, trade at a yield of 8.52%, the average level of even lower rated, nearly bankrupt companies, Bloomberg notes.

FOOD FOR THOUGHT

The primacy of Silicon Valley as king of the global startup scene seems unassailable, with its dense networks of entrepreneurs, engineers, and venture capitalists, not to mention the many big companies like Apple and Google that serve as frequent launching pads. But in an un-bylined piece, The Economist argues that Silicon Valley is waning as a home to innovative new companies. Here's an excerpt while you wait for the many rebuttals to be penned:

The reasons for this shift are manifold, but chief among them is the sheer expense of the Valley. The cost of living is among the highest in the world. One founder reckons young startups pay at least four times more to operate in the Bay Area than in most other American cities. New technologies, from quantum computing to synthetic biology, offer lower margins than internet services, making it more important for startups in these emerging fields to husband their cash. All this is before taking into account the nastier features of Bay Area life: clogged traffic, discarded syringes and shocking inequality.

Other cities are rising in relative importance as a result. The Kauffman Foundation, a non-profit group that tracks entrepreneurship, now ranks the Miami-Fort Lauderdale area first for startup activity in America, based on the density of startups and new entrepreneurs. Mr Thiel is moving to Los Angeles, which has a vibrant tech scene. Phoenix and Pittsburgh have become hubs for autonomous vehicles; New York for media startups; London for fintech; Shenzhen for hardware. None of these places can match the Valley on its own; between them, they point to a world in which innovation is more distributed.

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BEFORE YOU GO

Prince Harry and his new wife, the Duchess of Sussex Meghan Markle, attended a charity showing of the hit musical Hamilton on Wednesday and the prince even sang a tiny bit of one song. That prompted this delightful tweet from creator Lin-Manuel Miranda: "King George III’s great-great-great-great-great-great grandson The Duke Of Sussex sang a few bars tonight."

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.