Clearwater-based KnowBe4, which bills itself as the world’s largest cybersecurity awareness training and simulated phishing platform, is getting into the venture capital business.
The company launched KnowBe4 Ventures earlier this year and made its first two investments in Q2. However, the company withheld a public announcement until Aug. 4, when its most recent partner – Miami-based Luma – closed an $8 million funding round.
“We wanted to get a little bit of proof behind it until we started talking about it too much publicly,” said Rob Henley, VP of corporate development. “But there seems to be good traction.”
Working in collaboration with established cybersecurity venture funds Elephant and Ten Eleven Ventures, KnowBe4 Ventures is co-investing in security startups focused on strengthening and supporting the human aspect of cybersecurity.
According to Verizon’s 2022 Data Breach Investigations Report, 82% of incidents involved the “human element,” including social attacks, errors and misuse. Despite the preponderance of human error resulting in significant data breaches, Henley noted that companies only spend about 3% of cybersecurity budgets on mitigating that aspect.
“We kind of feel like that dynamic has to change over time as people, companies and organizations look to spend more money where they’re going to have the best bang for their buck and the most impact,” he said. “And that’s better securing their people.”
Henley believes that as companies acknowledge where much of the problem stems from and budgets shift accordingly, good investment opportunities will follow.
Supporting burgeoning companies that focus on the human element of cybersecurity, said Henley, also bolsters the ecosystem surrounding KnowBe4’s services. He added that product integration between his platform – which is used by over 52,000 organizations worldwide – and the businesses in which it invests benefits both sets of customers.
To achieve that goal, Henley said KnowBe4 Ventures focuses on companies relevant to its existing customer base.
“And that could be that there’s an integration between our products and their products that brings value to the customers, or it could be that customers need both of our products together to solve a challenge,” he explained. “So, there’s that strategic product angle.”
KnowBe4 Ventures, said Henley, is targeting early-stage businesses, from seed round through Series B. Operating solely from its balance sheet, it will only invest in companies with an established lead investor, products in the market, initial customer traction, a compelling financial strategy and long-term growth potential.
“Past the initial incubation stage, to some extent,” he said.
While KnowBe4 is looking for businesses that provide an added value to its customers and products, Henley noted the end goal is netting a return when the investment eventually sells or goes public.
Like many people, Henley believes preventing data breaches is vital to national security. He noted that state-sponsored cyber attacks continue to increase, often resulting in collateral damage to private companies and their customers. The geopolitical climate, he said, heightens the need for businesses to remain vigilant.
Across the bay at the University of South Florida’s Tampa campus, Retired Marine Gen. Frank McKenzie is leading the new Global and National Security Institute and previously established Cyber Florida facility. Out of all the threats the U.S. faces, McKenzie said the nation’s cybersecurity worries him the most.
Henley said many successful companies in the industry are emerging from the Tampa Bay area, which increases the network and investment opportunities. While KnowBe4 Ventures is not limiting its focus to the region or state, Henley said he would “love to support” local entrepreneurs.
“I think it definitely builds on itself,” he said. “As there are more successes and people in the area that are interested in building these types of businesses.”