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10 things we learned about KnowBe4 in its IPO

Margie Manning



Stu Sjouwerman, CEO, celebrating as KnowBe4 hits unicorn status in 2019.

Clearwater cybersecurity training business KnowBe4 — the first technology unicorn headquartered in the Tampa-St. Petersburg area — plans to raise at least $100 million in an initial public offering.

The planned IPO was disclosed in a filing with the Securities and Exchange Commission late Friday, almost exactly one year since the St. Pete Catalyst was the first to report that CEO Stu Sjouwerman was preparing the firm to go public.

Related: Amid an almost certain recession, KnowBe4 preps for growth

KnowBe4, founded in 2010, focuses on enabling employees to make smarter security decisions online, Sjouwerman wrote in a letter in the SEC filing. The company offers a simulated phishing platform and other training tools.

KnowBe4 has not yet said how much stock it plans to sell or at what price. But there’s still a lot to learn about KnowBe4 from the March 19 SEC filing, including how much money the company made, its growth strategy and who owns the most stock.

Financials. KnowBe4’s revenue grew 145 percent between 2018 and 2020.

Like many relatively young tech companies, KnowBe4 has reported net losses – $9.2 million in 2018, $124 million in 2019 and $2.4 million in 2020. The company considers annual recurring revenue a key metric. For 2018, 2019 and 2020, ARR was $88.6 million, $145.4 million and $198.4 million, respectively, while cash flow from operations was $17.7 million, $29.7 million and $44.9 million for those same years.

Customers. The ability to attract and retain customers and expand relationships with them drives annual recurring revenue. KnowBe4 has been consistently gaining customers over the past three years, although there’s been a decrease in year-over-year growth as the company focuses on bigger customers and managed service providers which have longer sales cycles.

An increasing percentage of revenue has come from international customers. In 2018, 6 percent of revenue came from overseas. That grew to 11.9 percent of revenue by 2020.

Growth strategy. KnowBe4 estimated there’s a $15 billion total market for its platform. It sees significant opportunities to expand by investing in sales and marketing to increase security awareness and increasing its international presence. Cross-selling and upselling products also present growth opportunities. So does continued investment in the company’s technology platform and content, the filing said.

As of Dec. 31, KnowBe4 had 48 issued patents in the United States, 22 patent applications pending in the U.S. and four pending internationally.

Acquisitions. Buying other companies is another growth strategy. During 2018 and 2019, the company completed five acquisitions, spending a total of $10.8 million. It bought MediaPro Holdings during the first quarter of 2021 for an undisclosed price.

Facilities. The company leases 130,203 square feet of space in Clearwater, where its corporate headquarters are located. It also has offices in Australia, Brazil, Germany, Japan, the Netherlands, Norway, Singapore, South Africa, the United Arab Emirates and the United Kingdom.

Employees. KnowBe4 headcount grew from 621 employees as of Dec. 31, 2018 to 810 employees at the end of 2019, to 1,014 employees at the end of 2020.

Executive compensation. The SEC filing included 2020 pay package information for Sjouwerman as well as Krish Venkataraman, co-president and chief financial officer, and Lars Letonoff, co-president and chief revenue officer.

Sjouwerman’s total compensation last year was $831,933 in salary and bonus. Venkataraman’s pay package totaled $2.7 million, almost 60 percent of that from the value of stock options. Options accounted for about 53 percent of Letonoff’s $1.7 million pay package.

Principal stockholders. Funds affiliated with Elephant Partners, an early investor in KnowBe4, own the biggest chunk of stock outstanding right now. Elephant controls 28.82 percent of the stock, while KKR, which led a $300 million funding round in 2019, owns 19.75 percent, the filing said.

Funds affiliated with Goldman Sachs have 8.93 percent of the stock; Tiger Global Management, 7.25 percent; and Vista Equity Partners, 9.23 percent.

Sjouwerman and Kevin Mitnick, chief hacking officer, each control 7.86 percent of the stock.

All hold Class B stock, the only class of stock outstanding, but that will change after the company goes public and it issues Class A stock. Class A stockholders will have one vote for each share, while Class B stockholders will have 10 votes for each share.

Covid-19. When the Catalyst visited KnowBe4’s headquarters on March 20, 2020, the World Health Organization had just declared the Covid-19 outbreak to be a pandemic and the local area was beginning to realize the impact. A temperature check, novel at that time, was required before I could sit in a conference room to talk to Sjouwerman. The company’s headquarters was largely empty as employees had just begun working from home.

Since then KnowBe4 has enabled employees and contractors to work remotely, implemented travel restrictions and shifted some company events and meetings to virtual experiences, the SEC filing said.

Conditions caused by the pandemic could have an adverse impact on KnowBe4, including slowing the rate of global IT spending, the filing said. On the flip side, it may temporarily increase demand for KnowBe4’s platform and products, as employees working from home have elevated cybersecurity and privacy risks.

Corporate culture. Lots of companies talk about their culture, but in a somewhat unusual move KnowBe4 highlights it in the SEC filings as a key risk factor.

“We believe that our corporate culture has been a contributor to our success, which we believe fosters innovation, teamwork, passion and focus on building and marketing our platform and products. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively and execute on our business strategy. Additionally, our productivity and the quality of our products may be adversely affected if we do not integrate and train our new employees quickly and effectively,” the filing said.

KnowBe4 is committed to putting customers, employees and shareholders first, Sjouwerman said in a letter in the filing.

“We’re committed to finding the best people in the industry and helping them do their best work. We’re committed to always strive to do more today than we’ve done the day before. We’re committed to building a company that we can all be proud of and making the world a safer place,” the letter said.

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