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2016 IPO Prospects: Tanium Bootstrapped First, Raised Money Later

Posted on Wednesday, Mar 16th 2016

According to security advisory firm SSP Blue, global spending on information security grew 5% in 2015 to $75 billion. Another report estimates the market to grow nearly 10% annually over the next five years to be worth $170 billion by 2020. Emeryville, California-based Tanium is making big moves in this fast-paced market.

Tanium’s Financials

Father and son duo David and Orion Hindawi founded Tanium in 2007 after selling their earlier venture BigFix to IBM for $400 million. The duo selected a few engineers from BigFix and built and tested out a new platform focused on real-time security services. Tanium’s platform was built to allow quick visibility and control over every endpoint, irrespective of its scale. Tanium works on a peer-to-peer system, thus allowing each device on a network to communicate with the other to build a chain that connects to a single server. Using this technology, the company is able to avoid deployment of large servers and simplifies the process of monitoring and managing cyber attacks and updates. The software has received positive reviews as it delivers a simple, yet fast security status of every single Internet-connected device in question. Tanium’s customer list includes names like Target, Visa, Amazon, Best Buy, the US Department of Defense, and the Nasdaq. Tanium claims that its software is able to assess every endpoint on the network within 15 seconds.

Tanium does not disclose its detailed financials, but is estimated to have ended 2015 with revenues in excess of $200 million. The company is expected to be profitable and cash flow positive. It has been profitable since 2012 and has grown 200% year over year.

Tanium was bootstrapped initially before raising $302.3 million from other investors since 2014. Tanium’s investor list includes Andreessen Horowitz, TPG, Institutional Venture Partners, T Rowe Price, Franklin Templeton, and Geodesic Partners. Its last round of funding was held in September 2015 when it raised $147.5 million at a valuation of $3.5 billion. It was valued at $900 million during its first funding round in 2014.

Tanium’s Partnerships

Tanium has been growing through strategic alliances. Last year, it entered into an agreement with Palo Alto Networks. Through the alliance the two will share with each other information on malicious indicators to beef up security. Palo Alto Networks’s WildFire is a cloud-based threat prevention service that detects malicious activity and prevents threats before an enterprise is compromised. The alliance will help Tanium interrogate, validate, and take remediation action if needed on every geographically distributed endpoint across an organization based on information provided by Wildfire. Similarly as Tanium identifies new threat indicators at the endpoint, it will share that information with Palo Alto Networks to create a closed-loop system where both network and endpoint protections are continually secured.

Last year, Tanium also entered into an agreement with PwC to integrate PwC’s cyber security consulting expertise with Tanium’s endpoint security and systems management services. Through the agreement, PwC will introduce Tanium’s offerings to its Cyber Security Practice and deliver threat intelligence, incident response and remediation, data privacy impact assessments, and integration consulting. The move will help expand Tanium’s client base globally.

Analysts expect that Tanium may be looking to go public soon. Tanium’s management has not commented, but it has done some senior management shuffling to induce these rumors. Earlier this year, co-founder and former CTO Orion Hindawi replaced his father David Hindawi as the CEO. David moved out to the role of an Executive Chairman.

The cyber security industry is not seeing a very bullish stock market. Vendors like FireEye and Palo Alto Networks have seen their valuations fall by nearly a third this year. One will have to see more detailed financials for Tanium before commenting on its multi-billion dollar valuation. Analysts believe that the cyber security market is ready for consolidation. Bigger vendors are already expanding their presence in the industry. Earlier this year, IBM announced the acquisition of Resilient Systems. I think that someone like HPE may be interested in Tanium, given its impressive product. Adding cyber security could help HPE enhance its software strategy.

This segment is a part in the series : 2016 IPO Prospects


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