Thoma Bravo Investment Values Cybersecurity Biz At $1.15B

By Sierra Jackson
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Law360 (December 10, 2020, 6:38 PM EST) -- Private equity firm Thoma Bravo announced Thursday that it has injected Venafi with an investment that valued the cybersecurity company at $1.15 billion in a deal guided by Kirkland and Orrick.

Kirkland & Ellis LLP client Thoma Bravo said in a news release that Venafi, advised by Orrick Herrington & Sutcliffe LLP, would use the investment to accelerate the innovation of its technology.

Venafi told Law30 that the private equity firm purchased a majority stake and growth equity firm TCV and venture capital firm Foundation Capital retained their stakes. The financial terms of the deal were not disclosed. 

"Venafi created the rapidly growing machine identity management category they continue to lead, and we have watched the company's growth accelerate as customers recognize the magnitude and complexity of their machine identity management needs," Seth Boro, a Thoma Bravo managing partner, said in a statement. "We look forward to leveraging Thoma Bravo's operational capabilities and deep understanding of the cybersecurity market to help drive Venafi's continued growth and market position."

Venafi CEO Jeff Hudson told Law360 in an interview Thursday that the Salt Lake City, Utah-based company was founded in 2004, but he joined the company in 2010. Hudson said he shifted the company's focus to providing machines with identities that could be used to ensure security in a world he imagined would be increasingly reliant on machines.

Hudson added that since the coronavirus pandemic has compelled most people to work from home, the firewalls and perimeters that decided what could enter digital spaces have been eroded.

"Well, how am I going to secure things?" Hudson said. "How do you get out of the country or in the country? Show me your ID. It's the same thing with machines. You've got to be able to have identities."

Venafi has more than 30 patents for its technology to manage machine identities, according to a press release. Hudson said he couldn't disclose its customers by name because of security reasons, but they include some of the top U.S. health insurers, airliners, retailers and banks as well as major companies in the United Kingdom, South Africa, Australia and other parts of the world.

Hudson told Law360 that the company has raised roughly $200 million to date. He also said that through Venafi's latest investment, the company and Thoma Bravo are uniting to forge what he thinks "will be the most important cybersecurity company of this decade."

"The valuation represents not only the work we've done, but it represents what Thoma Bravo sees in the future," Hudson said. "They invested in us because we created the category, our customers are incredibly successful and they see an amazing future because we're just at the beginning of digital transformation."

Venafi isn't the only cybersecurity business that's hit unicorn status — an industry term for privately held companies worth $1 billion and up — as investors have increasingly invested in their products. In October, Arctic Wolf Networks Inc. revealed that it reached a $1.3 billion valuation after landing $200 million from investors.

Cybersecurity giant McAfee Corp. also received $740 million from investors through its October stock market debut.

A representative for Thoma Bravo, which has offices in Chicago and San Francisco, declined to comment beyond the press release.

The Kirkland corporate team advising Thomas Bravo includes partners Corey Fox, Bradley Reed and John Berger, and associates Brett Nelson, Sarah Loiselle and Kate Kennedy.

Venafi's financial adviser is J.P. Morgan Securities.

The Orrick team advising Venafi is led by corporate partners Mark Seneca and John Bautista, and includes technology companies of counsel Elizabeth Lefever and associate Jamie Shinn; tax partner Steve Malvey; compensation and benefits partner Jason Flaherty and senior associate Keith Tidwell; antitrust and competition partner James Tierney and of counsel Diana Gillis.

--Additional reporting by Elise Hansen. Editing by Emily Kokoll.

Update: This story has been updated with additional counsel information.

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