Zillow, with Growing Revenue and Shrinking Losses, Files Paperwork for IPO

4/18/11Follow @curtwoodward

Seattle online real-estate company Zillow is trying to raise nearly $52 million in an initial public offering, according to registration paperwork filed today with the Securities and Exchange Commission.

Zillow, which has been edging toward an IPO for some time, said in the statement that its revenues nearly doubled last year to about $30.5 million. The company is still losing money—but those losses have been declining significantly, dropping from about $12.9 million in 2009 to about $6.8 million in 2010.

The filing also shows that Zillow has been spending down its cash stockpile in the past few years, and although it isn’t running out, the company is apparently looking to this IPO to replenish its well. The S-1 said that Zillow’s cash and short-term investments stood at about $41.7 million in 2007, but had dropped to about $13.8 million last year.

Three investment groups have the most to gain through a Zillow IPO. TCV Funds holds almost 30 percent of Class A common stock, followed by Benchmark Capital, with 19 percent, and Par Investment Partners, with about 11 percent ownership as of today. Company co-founders Rich Barton and Lloyd Frink also are the sole holders of Zillow’s existing Class B stock, which gives them a 10-to-1 vote advantage over other stockholders. The split is roughly 55 percent for Barton and 45 percent for Frink.

The company also said it would sell $5.5 million worth of stock at the IPO price to existing investors, including Technology Crossover Ventures, in a concurrent private placement. Zillow has attracted nearly $90 million in financing over its lifespan.

Zillow said its revenue growth in the past few years has been largely driven by growth in its “marketplace” revenues, which include subscription fees for real estate agents and advertising sold to mortgage lenders, along with charges for lenders to participate in the company’s Mortgage Marketplace.

The underwriters of the proposed deal are Citi, Allen & Company, Needham & Company, ThinkEquity, and First Washington.

Zillow had a pretty big year in 2010. In July, the company partnered with Yahoo Real Estate, creating the largest real estate advertising network in the industry. It inked another partnership in the fall, this one with Chicago-based Apartments.com to create a more comprehensive national database of apartment listings.

Spencer Rascoff was promoted to chief executive last fall, taking over for Barton. At that time, Rascoff said the Zillow Mortgage Marketplace was its fastest-growing business. That feature lets consumers anonymously shop for mortgage rates in different markets around the country. Zillow also recently extended its brand of pricing estimates—or “Zestimates”—to apartment listings.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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