Security continues to remain top of mind for organizations and consumers, as each day seems to bring another high-profile network breach. One of the faster-growing startups in the space is capitalising on that by raising some significant funding to fuel its growth. Tanium today said that it has raised another $200 million in funding with a post-money valuation of $6.5 billion. The funding was led by Wellington Management, with Baillie Gifford & Company and Adage Capital Management LP also participating.
The money is notable not just for the size and valuation, but for the timing: it comes less than five months since the company closed its last round, $175 million at a $5 billion valuation. The company has now raised just under $683 million in total with other investors including Andreessen Horowitz, Citi Ventures, Franklin Templeton Investments, and Geodesic Capital.
Fazal Merchant, the COO and CFO of the company, said in an interview that the proximity in part was because of the fact that money is coming in fast right now for the fastest-moving startups, but it’s also because the impetus behind the funding is a little different.
“The last round was largely an inside round,” he said of the May 2018 deal, which came entirely from previous investor TPG. He described this latest investment as “deliberate” and focused instead on new outside investors. “We have friends and family who have been investors for a long time and this gives them liquidity.”
What Tanium doesn’t need, he said, was the funding to extend its runway. The company announced at the end of 2017 that it had turned profitable and while it’s not commenting directly on that today, Merchant said that the company has stayed cash-flow positive. “We have grown Tanium with the belief that profitability and cash flow are not an afterthought,” he said.
The company says that in 2018 (fiscal year end 2017), it had $320 million in cash and equivalents, and positive operating cash flow of $25 million, with billings growing to more than $270 million, and ARR of approximately $230 million, up over 80 percent from the prior year. Net renewal rates — a big metric for enterprise SaaS businesses — was over 150 percent, it said.
Large organizations tend to run their security services on two tracks: one sets and tracks compliance with security policies, while another runs operations across the network to detect potential breaches or other behavior that might occur outside that policy framework, tapping into the fact that the growth of mobile has led to a huge proliferation of new devices that are touching an organization’s network. Tanium up to now has built its business by effectively offering services across both tracks, and by building services in-house, and positioning itself as a platform, versus a single-purpose security offering.
Merchant said that going forward that will continue to be the case: “Acquisitions are often made when a company’s organic growth starts to plateau, but that hasn’t been a constraint for us yet,” he said. The company has definitely looked at options — there has been a lot of fragmentation, and consolidation, in the wider security space, and that has doubtless affected Tanium both as a potential buyer and acquisition target — but to date it has not made a single acquisition.
“Tanium is an extraordinary platform, providing IT security and management at scale for some of the world’s most successful companies,” said Peter Singlehurst, head of the unlisted equities team at Baillie Gifford, in a statement. “As long-term investors, we look forward to supporting Tanium’s management team over the coming years as it continues to build a world-class technology business.”
The news today — and Tanium’s run this year — potentially puts to bed another bumpy part in the company’s story. In 2017, the company was singled out as “troubled” due to the fact that it saw a huge wave of departures among its executive team, including seeing its CTO swap out in place of the CEO (his brother) to run the business.
“We introduced our technology to the world five years ago, and in that time, we have grown to be over 800 team members strong and helped hundreds of the world’s largest enterprises — including over half of the Fortune 100 — achieve stronger business resilience,” said the current Tanium CEO, co-founder Orion Hindawi, in a statement. “We are thrilled to have such a strong set of investors support the Tanium vision of transforming the way industry-leading companies are able to manage and secure their networks against ever-advancing technology-based disruptions.”