Tanium IPO: Unique Cybersecurity Offering Is Highly Valued By The Market

  • Cybersecurity firm, Tanium recently raised $120M from leading VC funds.
  • The company offers a unique solution to communicate, in real time, with IT machines and track down attacks.
  • Tanium presents strong growth indicators and a broad, stable customer base.
Tanium IPO an attractive investment

Cybersecurity is one of the hottest sectors these days in the tech industry. The increase in the amount of data gathered and kept online and the increase in cloud services and global interactions have created a higher need for top-notch security. Furthermore, the frequent security breaches that have happened lately drive enterprises to look for more advanced IT security than they currently have, and that has impacted the cyber security market greatly. As shown in chart 1 below, only one out of five leading cyber security stocks yielded less than a 20% return year-to-date [Check Point (NASDAQ:CHKP)] while the rest yielded phenomenal returns even after experiencing strong correction in the last few months.

Tanium_chart 1_090815

The cyber security trend did not ignore the private equity market that attracts many investors to invest in early stage companies to benefit from an even higher return than showed above. As shown in chart 2 below, this year alone, cybersecurity firms raised $1.2B and more than $4.6B in the last couple of years when the total amount of financing grew at 40% year-over-year.

Tanium_chart 2_090815

The last cybersecurity company to receive significant funding is Tanium, a California-based startup that secured $120M from Andreessen Horowitz, TPG, and Institutional Venture Partners last week. The recent funding is taking place only six months after the company raised $52M from Andreessen Horowitz in March earlier this year.

Tanium develops a different type of cybersecurity solution that enables IT departments in major enterprises to collect real-time data on each IT asset in seconds. Tanium allows the IT departments to keep track of all its assets in real-time, whether they are laptops, desktops, servers, virtual machines or even ATMs, and monitor whether one of these end points was compromised or hacked. In the case that a computer was hacked, Tanium can track down and identify the source of the attack, the geographic location of the hackers, and many more details than what they were able to gather before. According to the company’s co-founder and CTO, Orion Hindawi, “certain attacks change their form every few minutes, so using 3-day old data won’t help the company to track the attack and restore the security breach.”

Tanium's biggest change to the world of cybersecurity is not in the quality of firewall, antivirus or data analytics but in adding the capability to protect an enterprise IT network in real-time by identifying breaches in seconds, tracking them down and solving them as they happen. In light of the increasing frequency of security breaches, Tanium’s innovative solution attracted more than 50% of the Fortune 100 companies and a variety of government agencies as users of the company’s products.

The increased interest in Tanium’s products is also reflected in its financials, as I was able to gather from the company’s public statements and press releases. Tanium presented some slightly vague figures that shed positive light on its growth trend (financials available in the $52 million fundraising press release and the recent $120 million funding press release):

  • Billings for 2014 were four times higher than billings for 2013.
  • Transactions above $1M in 2014 were 800% higher than in 2013, and transactions above $5M were 300% higher than in 2013.
  • In the first half of 2015, Tanium generated 100% more transactions than it did during the same period last year.
  • Q2'15 bookings were 250% higher year-over-year.
  • Its cash flow is positive.
  • Tanium ended 2014 with excess cash of $100M.

Even though these figures/statements don’t show the entire picture, they indicate the company’s growth trend. The fact that the company's $1M transactions increased by 3-digit percentage points is impressive, and so are its increased bookings year-over-year. With positive cash flow and a large pile of additional cash, the company seems set to maintain financial stability alongside significant growth, which is not too common among start-ups. Another indicator of the company’s strength is its growing valuation: the company doubled its valuation in every funding round, from $900M in June 2014 to $3.5B in September 2015, as shown in chart 3 below.

Tanium_chart 3_090815

As the company has a broad customer base, strong growth indicators, and a unique cybersecurity offering that attracts investors, Tanium IPO could be on the cards. Moreover, other cybersecurity companies of similar size like Splunk (NASDAQ:SPLK), CyberArk (NASDAQ:CYBR), and FireEye (NASDAQ:FEYE) already went public. I believe there is a very good chance that we will see Tanium IPO in the near future. As it seems now, Tanium IPO will be an attractive one to participate in, but only once Tanium files for an IPO and releases its full, official financial information, will I be able to revisit my thesis and make a more accurate forecast.

Disclosure: The information provided in this article is for informational purposes only and should not be regarded as investment advice or a recommendation regarding any particular security or course of action. This information is the writer's opinion about the companies mentioned in the article. Investors should conduct their due diligence and consult with a registered financial adviser before making any investment decision. Lior Ronen and Finro are not registered financial advisers and shall not have any liability for any damages of any kind whatsoever relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing.

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