Jan 12, 2023

SMS investors—including Gov. J.B. Pritzker's former venture-capital fund, Pritzker Group Venture Capital, and Goldman Sachs—reinvested an undisclosed amount in the combined company, which raised another $500 million in debt and equity in connection with the acquisition. The company said clients also invested in the deal. SMS Assist is one of just 14 Chicago-based "unicorns," or venture-backed companies, valued at $1 billion or more. It has nearly 1,000 employees, including 700 in Chicago, who are expected to stay with the combined company. "We have upside to grow substantially together," said Mike Rothman, who led SMS Assist from 2003 to 2017. SMS Assist has a large commercial business, and Lessen focuses on residential. The deal gives recurring-maintenance capability to Lessen, which built an online platform to help residential property owners line up service providers for rehabs and turnarounds of rentals. "It's a large deal, and large deals aren't getting done right now," Rothman said. These are tough times for unicorns, which were being minted at a blistering pace before the slump in tech stocks that began a year ago. Private companies don't reset their valuations until there's a transaction, so most unicorns retain their status for now. But the herd likely will be culled as private-company valuations, which are tied to those of public companies, have fallen hard. The Nasdaq is down 28% in the past year, and the IPO market has dried up. Private-equity deals, another common route for venture investors to cash out, have been slowed by rising interest rates, which put pressure on valuations . Nationwide, exit activity by venture-backed companies in the fourth quarter of 2022 was the lowest by dollar value in a decade, according to PitchBook. "It's a tough deal environment because of the debt markets. But good assets are being sold for strong multiples, despite the market," said Michael Gray, a partner at Neal Gerber & Eisenberg. "This is a home-grown home run." SMS grew into one of Chicago's largest privately held companies , nearly doubling revenue between 2016 and 2021 to $590 million. It grew more than 30% last year under Marc Shiffman, a company veteran who became CEO in 2019 . Lessen's revenue was not disclosed. SMS was profitable early on and didn't take outside capital until 2008, eventually raising $263 million. Pritzker Group Venture Capital invested in 2011, followed by Insight Partners in 2015 and  Goldman Sachs in 2016 . The company got its start in 1999 serving commercial customers, such as JPMorgan Chase and Family Dollar, lining up vendors to handle everything from cleaning floors to plowing snow. The company built web- and mobile-based technology that it used to manage 20,000 service providers nationwide. Eventually, it moved into the residential market. One of its first customers, Colony American Homes, was led by Jay McKee, who founded Lessen three years ago. It has raised $205 million. When it last raised funding in late 2021, the company had 450 employees and 2,000 service providers on its platform. RECOMMENDED FOR YOU