The Reuters- Cybersecurity company Arctic Wolf raised $401 million in convertible notes led by existing investor Owl Rock, the latest example of late-stage startups seeking alternative financing to bridge the gap between funding rounds and the initial public offering IPO The fundraising, in which Viking Global Investors, the Ontario Teachers Pension Plan and Neuberger Berman also participated, which will help the company to bolster its balance sheet and fund potential acquisitions, Nick Schneider told Reuters in an interview.
Arctic Wolf, which raised equity financing at a valuation of $4.3 billion in July 2021, has been working with banks on IPO preparations since the beginning of this year.
According to the report from EY, one of the longest droughts for tech IPOs in the U.S. has been caused by rising interest rates and volatile market conditions.
The markets just aren't in a great spot for IPOs, and that's why we wanted to look at our other options, said Schneider.
As the valuation resets in the market, convertibles with a valuation cap and a conversion price, along with downside protection for investors, have become more popular among startups.
Arctic Wolf, based in Eden Prairie, Minnesota, provides security software tools and services to help companies detect and recover from cyber threats. It now serves over 3,000 customers across industries, from healthcare to manufacturing, with over 1,100 channel partners, to provide enterprise-level security to organizations that don't have the security resources.
In the past year, the company has doubled its headcount and revenue, due to expansion into new regions, including South Africa and Australia, Schneider said.