Billion-dollar cyber security startup Tanium plans further secondary share sales before IPO

 
Lynsey Barber
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Tanium is backed by millions in venture capital and private equity cash (Source: Getty)

Tanium, the world’s most highly valued cyber security startup, is planning further secondary share sales signalling plans to go public are further on the back burner.

An IPO had been on the cards for this year, but it pulled back on plans in May with founder and chief executive Orion Hindawi citing volatility in recent tech floats. Instead it allowed its co-founder, early investors and employees to cash out $100m worth of stock.

Now the US firm, valued at $3.75bn and backed by top Silicon Valley venture investors Andreessen Horowitz and IVP as well as private equity giant TPG, plans to embark on further sales of secondary shares “on a pretty good frequency”.

“We just did one, we’re going to keep on doing them. As long as we have a permissive funding environment, as long as we’re making money, we can kind of have our cake and eat it too,” he told City A.M..

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“It won’t work forever. The numbers get bigger and bigger, and eventually going public is the right thing to do. But the secondary appetite in our space has gone up pretty significantly. Generally a lot of people are gravitating toward this as an interim solution for liquidity. It’s not a long-term solution."

In the previous sale TPG and IVP both bought up common stock in the firm, which boasts clients such as top global banks, Amazon, Nasdaq and the US Department of Defence. Secondary share trading has boomed in the US as highly valued companies stay private for longer. It’s estimated the value of that market will be worth $38bn this year, up from $35bn last year and just $11bn in 2011, according to figures from US investment bank Scenic Advisement.

On going public, Hindawi said: “The biggest challenge we have and what we see in the market - and we watch our peers in the market - is that we have incredible pressure to hit every number right on the nose. And when you’re growing 100 per cent year-on-year, that’s really hard to do.

“The analogy someone made to me recently was, when you’re a plane that’s climbing as quickly as you can, it may look smooth from the ground but it doesn’t feel smooth on the plane. Every gyration is being measured. It would be a scary time to be a public company if we are growing between 90 and 110 per cent every year and people think 90 per cent is devastatingly bad and 110 per cent is incredibly good.”

He added: “I think we’re going to need to continue growing enough that sustainability and repeatability and forecastability are down and I don’t think we’re there yet. I have a $35m deal on the table that could come this month or next month or the month after, and that’s not where you want to be as a public company.”

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But he also suggested the timing would also come down to market appetite and that the pressure of a “ticker” - fluctuations in the price of shares - would impact staff morale.

“There’s a whole new kind of psychology attached to that. It’s very distracting. If it’s going up and up and up, everyone feels good. If it’s going up and down 10 per cent every day, everyone feels extremely unstable. And I don’t want to put people in that position. If we're going to go, we’re going to go when we’re ready, instead of by force,” he said.

“And we’ve been pretty open about this. We’ve been cash-flow positive, we have hundreds of millions of dollars in the bank, there’s nothing that would force us to this. I think it’s a question of when is the company actually ready.”

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