July 3, 2011

Go Daddy gets cash infusion

The Go Daddy Group Inc., the Scottsdale-based domain-name registrar known for its racy Super Bowl commercials, has landed a multimillion-dollar investment from three private-equity firms that have been putting their money in high-tech darlings such as Facebook, Groupon and eHarmony.

Go Daddy did not disclose the amount of money it received.

Founder Bob Parsons said Friday that he expects the infusion of cash, and especially the expertise and guidance the equity companies will provide, to help Go Daddy grow internationally.

Parsons said the new investment, along with what he and other members of management have already put in, brings the total valuation of the privately held company to more than $2 billion.

That would put the company in about the top-10 tier of Arizona's most valuable companies, based on stock values, according to an Arizona Republic calculation. It's only a rough comparison, however, because Go Daddy shares are not publicly traded.

The company provides a number of services, including domain registry, that enable businesses and individuals to have an online presence and to participate in the rapidly growing field of "cloud" computing.

In its simplest form, that refers to the practice of storing data and applications on remote servers instead of desktop computers and providing services to help companies and individuals enhance those applications. Cloud computing makes digital information more accessible and frees companies from the expense of maintaining data on their own computers.

"We are talking about providing our services all over the world, in local languages, in accordance with local customs and advertising, in such a way as it works," Parsons said. Though Go Daddy Girl promotions might not fly in every country, Parsons said Europeans and South Africans are accustomed to edgier advertising than are U.S. residents.

Go Daddy, which has about 2,800 Arizona employees, will keep its headquarters in Scottsdale, Parsons said.

Parsons will remain the largest single shareholder, but his title will change from chief executive officer to executive chairman - a role he defined as "a working chairman." Warren Adelman, Go Daddy's chief operating officer, becomes CEO.

"We expect nothing about the company will change. The management will not change. The only thing that will change is that we expect our growth rate, which has already been great, will accelerate," Parsons said.

Parsons said he is interested not only in adding customers but in acquiring companies. He said that is where his new investment partners will help. They evaluate hundreds of companies a year and can guide him and help fund strategic purchases.

Steve Zylstra, president and CEO of the Arizona Technology Council, said the investment is a huge endorsement of Arizona's high-tech industry. He pointed out that this week also brought news that OneNeck IT Services, a Scottsdale-based data-hosting and information-technology company, was sold for $95 million to a Chicago telecommunications firm.

"Other areas of the country have their Amazons and Googles and Facebook, and this is one of the major ingredients that we have lacked - a notable tech company (Go Daddy) that is having great success in our community.

"It tends to act as a magnet to attract other like companies because it suggests that they can thrive and be successful in the environment we have in Arizona and that the right kind of talent is available to drive the growth of a company like that," he said.

Zylstra said Go Daddy has the potential to grow a lot more but that it's premature to discuss whether it could ever reach the size of Facebook or Google.

Rumors of a possible sale of Go Daddy had been swirling for more than a week.

Go Daddy's announcement Friday did not go that far. The company said it signed an agreement to receive a "strategic investment" and become partners with KKR, a New York-based global investment firm managing about $61 billion in assets; Silver Lake Partners, a Cupertino, Calif.-based company that manages about $14 billion; and Technology Crossover Ventures, a Palo Alto, Calif.-based company that helps finance more mature technology companies, such as Facebook, Expedia, Groupon, Netflix, Orbitz and Zillow.

Greg Mondre, managing director of Silver Lake, said in a statement that Go Daddy is "powerfully positioned for future growth as it continues to innovate and add to its truly unique platform of cloud-based software and services."

Will Griffith, general partner of Technology Crossover, was quoted in the announcement as saying, "For years we have admired what Bob and the team have built with Go Daddy. We are excited to invest in the business and contribute to its continued success."

Parsons said it's possible that Go Daddy ultimately could become a public company after its value increases significantly, but that any decision about an initial public offering would be made by Go Daddy's new investors.

While Go Daddy isn't disclosing the amount being contributed by its new partners, Parsons said 36 employees each will receive checks for at least $1 million, before taxes, because of options granted to them years ago that are now being converted into cash. When the company was young and struggling, Parsons gave employees shares in the company, and they now own about 22 percent.

Go Daddy has, for seven years, been ranked on Inc. magazine's 500/5000 list of the nation's fastest-growing privately held companies.

Its revenue on the 2010 list was listed as $610 million, up from nearly $241 million in 2006. The company has been adding workers at a fairly rapid pace.

Early this week, Go Daddy said its total employee count has risen to 3,219 from 2,936 in April.

The company has become the largest domain registrar in the world since its founding in 1997 and manages more than 48 million domain names. It has locations in Arizona; Colorado; Iowa; Washington, D.C.; Singapore; Toronto; and the Netherlands.

In an interview several months ago, Parsons said the idea for starting Go Daddy didn't come to him quickly. First, he sifted through various Internet ideas in the 1990s.

"I tried all sorts of things, and I came damn close to going broke," he said. "So, it wasn't until 1999 that I stumbled onto domain names, and in November 2000 I became a domain registrar. It took about a year and a million bucks to get to that point. We turned the corner in 2001."

When he entered the business, there were about 300 competitors. He said he now has about a 50 percent market share.

by Betty Beard The Arizona Republic Jul. 2, 2011 12:00 AM

Go Daddy gets cash infusion

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