After Seven Years, Why Now?: All along the way, we’ve had opportunities for funding and acquisitions, we passed on those chances because we were in a unique position early on. When we started in 2000, the market was decimated. You didn’t really need funding at the time to get something going because the cost of buying media was pennies and companies were more interested in figuring out how to streamline down from 400 people to 30. Anyway, we’ve been profitable from day one and we’ve just been reinvesting that profit back into the company, which has allowed us to grow.
PE vs. VC: Venture firms are usually early stage. Venture guys have a tendency to want to come in early, buy a lower valuation and swing for the fence. They make a lot of very small investments and they take more of a ‘carpet bomb’ approach. They’re going to drop $1.5 million into 40 different plays with the hope they’re going to grow these companies to a level where they’re going to come in for a second round or they’re going come back and bring in other VCs or PE groups. They’re looking for the YouTube hit, they’re looking for the MySpace hit. But at the end of the day, you look at their fund and there’s 17 losses and two hits, which make up for all the losses. PE groups traditionally don’t operate that way; they’re much more methodical and they make bigger investments and fewer of them. They have to make sure that every one of those businesses is a hit.  PE firms also tend to buy in at a higher, more favorable valuation because they’re only buying into businesses where they see a big exit opportunity. They’re not looking at it like, ‘I’m going to put $2 million in and we’re going to sell for $20 and I’ll make 10x.’ PE firms say, ‘I’m going to put $50 million-plus in and I’m going to sell for hundreds of millions and I’ll make a 3x – but that 3x is going to amount to a lot of money.

The Amount: Fitzgerald said that GN doesn’t plan to do a second round PE funding. The next time he wants to raise capital, he’ll do it through a structured debt offering.  “It’s not that we had a plan that called for a use of proceeds specifically for $50 million. Especially with today’s valuations, I may have in my mind currently, and within the next six months, 10 acquisition targets that I want to buy. With the money that I have on hand, depending on how negotiations go, I may be only able to buy three of them. Or I may decide I want 15. At the end of the day, if I lack the money, I’ll just debt finance the remainder. So the $50 million figure came down to the question of ‘How much of the company do I want to give up?’ You sit down and you work with these guys and you come up with a valuation. And depending on the amount of equity you want to give up in your company, that’s what drives the dollar amount.”