With $50M in bootstrapped revenue, Swagbucks raises $60M from TCV for its rewards and loyalty shopping platform

By Michael Carney , written on May 13, 2014

From The News Desk

In an era where startup valuations and the piles of capital that accompany them seem powered more by pixie dust than they do business fundamentals, it’s refreshing to encounter a company that’s able to grow exponentially outside of this seemingly artificial economy.

Prodege, the parent company to breakout online rewards community Swagbucks, has grown its business organically since launching in 2008. The Los Angeles-based company has delivered more than $60 million in consumer rewards across hundreds of ecommerce stores, incentivizing consumers to shop within the Swagbucks marketplace, engage with branded content, search within its dedicated search engine, play games, or complete surveys. The concept, which I once described as “the housewife currency,” has proven popular, enabling Swagbucks to operate profitably since 2010 and generated $53 million in 2013 revenues, up 51 percent year-over-year.

Today, Swagbucks announced that it’s ready to pour gasoline on that fire.

The heretofore bootstrapped company has raised $60 million in its first ever external funding, with the round coming entirely from Technology Crossover Ventures (TCV). The round was a combination of primary and secondary capital, meaning that founders and early employees received some payout, although the company declined to specify the breakdown.

In conjunction with the financing, Protege executive Chairman Chuck Davis, who was previously a venture partner at TCV has been appointed CEO of the company. Co-founder and prior CEO Josef Gorowitz will assume the role of president, while TCV’s Jay Hoag will join the company’s board of directors.

Swagbucks doesn’t need the capital, but with competitors like, eBates, and others beginning to focus attention on the category, it seems to be a smart move to amass additional dry powder. Adding expertise shouldn’t hurt either. Prior to joining Swagbucks, Davis was Chairman and CEO of online movie ticket site Fandango, a TCV investment, and President and CEO of Shopzilla (fka, BizRate), leading both companies to nine-figure exits. He’s also a board member at Boingo Wireless and was once the President of Ecommerce at Disney.

At a firm level, TCV has successfully invested in similar online consumer brands, including Fandango, Netflix, Zillow, HomeAway, and GoDaddy. The growth stage investor typically backs established companies and its involvement can often indicate that a liquidity event is imminent.

Over the next 12 to 18 months, Swagbucks will focus the bulk of its attention on building its mobile product, according to Davis. Like most commerce platforms, mobile represents a growing portion of Swagbucks’ revenue and engagement, but until recently has not gotten top priority on the company’s product roadmap. Longer term, the company will also look to global markets for additional growth, expanding beyond its limited presence in international English speaking countries.

Part of the use of proceeds under this new funding round will be to grow the company’s 100 person team. In addition to adding Davis as CEO, Swagbucks has already hired its first ever CTO and CFOs.

Online rewards may not seem like the sexiest category, and some will surely write it off as a gimmick along the lines of daily deals. But the reality is, it’s human nature to seek out value. And because Swagbucks has grown conservatively, rather than pumping hundreds of millions into customer acquisition, the company has amassed a loyal, engaged, and highly motivated community of users.

“At the most basic level, we’re entertainment married with commerce,” Gorowitz says – a powerful dopamine releasing activity combination if there ever was one.

We may no longer be mired in the “Great Recession,” but consumer behavior suggests that spending is still viewed cautiously. As a result, savings and rewards platforms like Swagbucks have growing rapidly over the last half decade. Whether this trend is one that continues remains to be seen.

“Who doesn't like getting value for free?” Davis says.

To the extent that consumers continue to prioritize savings, Swagbucks appears well positioned as the one of the largest rewards and loyalty shopping site on the Web. That the company got this far without a dollar of outside capital is a minor miracle and should earn its founders a gold star for scrappy entrepreneurship. It should be no less interesting to see what they can accomplish with a tens of millions worth of cash in the bank.