Revenue Works tells the story of Mike Sutherland and how he grew the search fund company he acquired from $5 million to over $150 million in revenue. After growing the company with debt and returning dividends to investors through leveraged recapitalizations with private equity investors, Sutherland had to decide the best course to gain liquidity for his existing investors who were eager to see a return on their investment. He had to decide whether to sell the company to a strategic acquirer (at a lower valuation), take on another private equity investor, or IPO the company in the public markets.
This case is intended for use in a course on entrepreneurship called Formation of New Ventures. The case is positioned toward the end of the course as it highlights the liquidity options available to entrepreneurs and makes students consider the advantages and disadvantages of going public. Students are also encouraged to consider how the financing decisions that entrepreneurs make as companies grow impact liquidity options longer term. Students should also appreciate the difference between a liquidity event and an exit for the founders. Going public in particular is a liquidity event but it normally commits the founders to many more years at the company and does not represent an exit for them.