Click the arrow above to hear the St. Pete Catalyst’s Finance Editor, Margie Manning, interview Stu Sjouwerman, CEO of KnowBe4.
KnowBe4, a Clearwater-based cybersecurity training company, will continue international expansion, tapping funding it has received from one of the world’s largest private investment firms.
KnowBe4 is opening offices in Singapore, Dubai and Australia, and is eyeing Japan, Stu Sjouwerman, CEO, told the St. Pete Catalyst.
To keep up with the growth, KnowBe4 is hiring.
“We are going to be pushing 1,000 employees and the vast majority will be here in Tampa Bay,” Sjouwerman said.
He’s also just signed a lease for two more floors in Clearwater Tower, the company’s headquarters at 33 N. Garden Ave. in downtown Clearwater.
The expansion indicates how much of a global problem cybercrime has become. Nearly $600 billion, or about 1 percent of global GDP, is lost to cybercrime each year, according to a 2018 report from the Center for Strategic and International Studies in partnership with McAfee.
KnowBe4 works with its corporate clients to help prevent cyberattacks by training their workers to spot threats such as phishing.
That human element is key, said Patrick Devine, a principal at KKR, the investment firm that led a $300 million funding round with significant participation by two existing investors, Elephant and TenEleven Ventures.
The new round values KnowBe4 at $1 billion and makes it a unicorn, a designation for a technology startup that’s valued at $1 billion or more.
It’s a great milestone, Sjouwerman said. “It’s an acknowledgement of the fact that this market is growing incredibly quickly. Last quarter, Q1, we grew 70 percent over Q1 the year before, so there’s enormous upside potential.”
Hitting unicorn status also says a lot about the Tampa Bay business community, Sjouwerman said, reiterating earlier comments that the location is a “massive competitive advantage.” He said he’s paying $20 a square foot for office space, while comparable space in San Francisco would cost $100 a square foot and would not be as attractive.
“Having started from nothing to unicorn status in Tampa Bay shows the rest of the business world and would-be entrepreneurs that this is an excellent place to start a business and become profitable and get support from the global financial community,” Sjouwerman said. “It is much easier to run a profitable business here.”
Some entrepreneurs have said private equity backing changes a company and its culture, but Sjouwerman said that hasn’t happened at KnowBe4.
“It depends very much on the private equity company. It also depends on the structure of the deal. That is a little bit of a generality. For us, it hasn’t changed much,” he said.
KnowBe4 initially received outside investment in 2016.
“Three years ago, I was approached by a venture capital company, a boutique VC called Elephant. They understood what we were doing, they were early, they were really smart, and I wanted the relationship more than I needed the money. We’ve been cash flow positive almost from the beginning,” Sjouwerman said.
A year after getting $8 million from Elephant, Elephant in turn introduced KnowBe4 to Goldman Sachs, which invested $30 million — also money KnowBe4 didn’t need, Sjouwerman said. Then, in late 2018, Elephant introduced Sjouwerman to KKR.
“They had created a new fund which was specifically focused on exactly the kind of company that we are. They came in late last year with not that much money, relatively speaking. Then they looked at what we were doing, and they understood more about us, and they saw our Q4 and Q1 performance, and they said, ‘Wow, we really want to invest much more than we initially did,’” he said. “It was fruitful for both of us. They came back to us and said we’re ready to make a bigger investment and we were ready to do international expansion, so that was good timing.”
The KnowBe4 office was decked out for a celebration of the latest investment yesterday.
“This is a wonderful day. We’re celebrating. Now up to a $10 billion valuation,” Sjouwerman said. “Shoot for the stars.”