‘Unicorns’ not a myth in the world of startups
Oklahoma and i2E scored another first in innovation and entrepreneurship in April when Alkami Technology, our state’s and our firm’s first “unicorn,” debuted on the Nasdaq (ALKT).
In venture capital parlance, “unicorn” describes a privately held startup company with a company valuation of over $1 billion. Unicorns in the traditional sense are a mythical breed, more likely imagined than seen — but in the venture capital business, they do sometimes appear.
Alkami Technology’s initial public offering (IPO) raised $180 million, selling 6 million shares of common stock, with a surging market capitalization that exceeded $3 billion — more than triple the definition of a “unicorn” deal.
The firm provides cloud-based digital banking solutions for banks and credit unions. The company was founded (as iThryv) by Oklahomans and a group of serial entrepreneurs made up of Gary Nelson, Scott Klososky, Steve Meston, Bobby Gruenewald and Louis Iaanaccone more than 10 years ago in Oklahoma City.
i2E made an initial concept investment through the OCAST Technology Business Finance Program (which iThryv repaid) early in the company’s life, and then in June of 2009, we made another investment in the form of a convertible note from the OCAST Oklahoma Seed Capital Fund (OSCF).
We last wrote about Alkami Technology as a potential unicorn in 2020 after i2E received a request from one of the largest venture capital funds in the world to buy all or part of the Oklahoma Seed Capital Fund’s position. We sold part of our investment and held the rest. It has been a blockbuster year.
As of August 2020, Crunchbase estimated the valuation of Alkami to be between $500,000 and $1 billion. As of this week, now that the frothiness of the IPO has settled down, Alkami’s market capitalization is $2.5 billion — more than two-and-a-half times last summer’s market outlook.
As we all know, stock prices and market capitalizations depend on the fundamentals of a business and how well the management team executes. For Alkami, as for any new IPO, much remains to be seen. Our purpose in featuring this Oklahoma-born venture is not to predict financial results.
Rather, I want to shine the spotlight on how this deal got started with concept and seed investments, first from Oklahoma’s TBFP and then from the Oklahoma Seed Capital Fund.
Back when Alkami was gaining traction, Oklahoma lacked the investment capital that the company needed to grow, so this Oklahoma startup raised capital initially from Texas-based S3 Ventures and then, ultimately, from investors including General Atlantic and D1 Capital. Goldman Sachs, JP Morgan, and Barclays were the lead underwriters in Alkami Technology’s IPO.
Alkami has more than 160 financial institutions using its services. In the words of Alkami CEO Mike Hansen, “Our Alkamists wake up every day focused on one thing: designing and delivering the best digital banking experiences for businesses and consumers of financial institutions.”
And, to paraphrase the words of Liberty Bank, an Alkami customer and one of Connecticut’s oldest banks with over $7 billion in assets, the reason for doing business with Alkami is because the company’s “deep expertise in retail and business banking translates to innovation.”
To restate Alkami’s secret sauce in i2E’s words — it is a dedicated and deliberate commitment to customer and market validation for product and market fit.
The success story of Alkami Technology — from an Oklahoma City startup to a multi-billion dollar IPO and i2E’s first unicorn — fans the flames of innovation and entrepreneurial possibility. The more startup companies with high-growth potential that we can support with venture services and seed stage capital, the greater the opportunity we have to create a herd of unicorns — which as Alkami Technology proves, are not always a myth.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state support from the Oklahoma Center for the Advancement of Science and Technology and is an integral part of Oklahoma’s Innovation Model. Contact Meacham at [email protected]