Business Blog: Wolf market

Why cybersecurity companies may be especially well-suited to the tribulations of the public markets, according to Arctic Wolf CEO Nick Schneider

March 11, 2024

Arctic Wolf seems to be going public—at some point.

And, no, we're not talking about the medium-sized species of shock-white wolf (though that would be quite an S-1). We're talking about the cybersecurity company providing software that spots and addresses cyber threats, which has raised just over $1 billion to date, according to the Fortune Cyber 60 report.

And though CEO Nick Schneider never said it explicitly in a recent Zoom interview with Term Sheet, it certainly sounds like Arctic Wolf is getting ready to go public. (The company's investors include Lightspeed Venture Partners, Redpoint, Ontario Teachers’ Pension Plan, and Adams Street Partners.) But, as with pretty much any conversation about going public these days, it's a question of timing. So, what's Schneider waiting to see?

"I think a rate cut and visibility into kind of where folks believe the right trajectory will settle out in earnest," he said. "That would be beneficial for the market wholesale, and it’ll certainly be beneficial for folks that are thinking about entering the [public] market."

To Schneider, cybersecurity companies are, in some ways, uniquely poised to succeed in the public markets—an entrenched cybersecurity company's customers will always need its services, whether rates are up or down, whether there's geopolitical strife or not.

"In the cyber universe, you have bad actors and those bad actors don’t react positively or negatively to market conditions. They continue to do what they do," he told Fortune. "Does it mean that market conditions don't have some impact? No, but it does mean that, relative to the rest of the market, cybersecurity companies can do relatively better."

He perhaps has a point, at least as of Friday's close: CrowdStrike shares are up about 165% over the last twelve months. In that time, Palo Alto Networks is up slightly more than 50%, Cloudflare's up about 70%, Datadog's up by about 73%. For comparison, the S&P 500 is up about 30% over the last year, while the Nasdaq is up about 40%.

I wanted to talk to Schneider because I've long heard whispers of Arctic Wolf specifically as an IPO hopeful or acquisition target. I also think it's poised to be a big year for cybersecurity exits (whenever that exit market does, indeed, open back up). A recent PitchBook report, which calls out data security startup Rubrik as a reasonably likely 2024 IPO candidate, explains that in the last quarter of 2023, cybersecurity multiples eclipsed software overall, reaching 9.1x enterprise value/sales over the next twelve months, as compared to 7.1x for software across the board. In a moment that's tough for private market valuations, that's not a bad deal if you're thinking about an IPO.

"I certainly think that there are some private companies, Arctic Wolf included, that have the opportunity and are on the trajectory towards being a massive public company in the long-term," said Schneider.

So though he won't say as much explicitly, it's crystal clear Schneider's vision for Arctic Wolf involves a ticker.

And…March 10 marked the one-year anniversary of SVB's collapse, when U.S. regulators took control of the bank that had so long been synonymous with tech. Keep an eye out this week for a couple of stories unpacking what has (and hasn't) changed since.

See you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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VENTURE DEALS

- Griffin, a London, U.K.-based banking-as-a-service platform, raised $24 million in funding. MassMutual Ventures, NordicNinja, and Breega led the round and were joined by Notion Capital and EQT Ventures.

- Cayosoft, a Columbus, Ohio-based provider of management and recovery solutions for Microsoft's Active Directory service, raised $22.5 million from Centana Growth Partners.

- Efficient Computer, a Pittsburgh, Pa.-based developer of computer processors, raised $16 million in seed funding. Eclipse Ventures led the round and was joined by others.

- BREV/ΛN, a Sunnyvale, Calif.-based platform for building AI agents with enterprise data, raised $9 million in seed funding. Felicis led the round and was joined by others.

- Fijoya, a Tel Aviv, Israel-based platform for employer-sponsored health and wellness services, raised $8.3 million in funding from Team8.

- Glacier, a San Francisco-based developer of AI-powered robotics designed for recycling sorting, raised $7.7 million in funding. New Enterprise Associates and Amazon's Climate Pledge Fund led the round and were joined by AlleyCorp, Overture Climate VC, and VSC Ventures.

- Bluwhale, a San Francisco-based AI-powered platform designed to connect companies with Web3 wallet holders, raised $7 million in seed funding. SBI led the round and was joined by Cardano, Momentum6, Primal Capital, NxGen, Ghaf Capital Partners, Spyre Capital, Baselayer Capital, and others.

- Sonarverse, an Irvine, Calif.-based crypto data infrastructure platform, raised $7 million in seed funding. BlockTower Capital led the round and was joined by United Overseas Bank, Aglaé Ventures, Third Prime Ventures, Ocular Funds, Aptos, FBG, and FJ Labs.

- Cognito Health, a Victoria, Canada-based virtual mental health care platform, raised $2 million CAD ($1.5 million) in seed funding from StandUp Ventures, Garage Capital, Graphite Ventures, Spring Impact Capital, and Simplex Ventures.

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PRIVATE EQUITY

- Court Square Capital Partners acquired a majority stake in Velosio, a Dublin, Ohio-based provider of cloud services for the Microsoft Dynamic ecosystem. Financial terms were not disclosed.

OTHER

- PAR Technology Corporation (NYSE:PAR) agreed to acquire Stuzo, a Philadelphia, Pa.-based provider of digital engagement software to convenience and fuel retailers, and TASK, a Sydney, Australia-based foodservice transaction platform. Financial terms were not disclosed.

IPOS

- Astera Labs, a Santa Clara, Calif.-based developer of semiconductor-based solutions for cloud and AI infrastructure, plans to raise up to $534 million in an offering of 17.8 million shares priced between $27 and $30. The company posted $116 million in revenue for the year ending December 31, 2023. Sutter Hill Ventures and Fidelity Management and Research back the firm