Huntress, an MDR and cybersecurity provider that specializes in SMBs and the service provider channel raised a huge round of funding a couple months ago in June -- $150 million. The series D round was led by giants including Kleiner Perkins, Meritech Capital and existing investor Sapphire Ventures. It more than doubled Huntress’ valuation to beyond $1.5 billion.
It wasn’t always that easy, CEO and co-founder Kyle Hanslovan told ChannelE2E. Back when he founded the company in 2015, “Silicon Valley still owned everything…Cybersecurity was hot then, but cybersecurity was like for the people who could buy Formula One cars…They weren’t thinking about, like, a sports car for the masses.”
But that’s just what Hanslovan had in mind with Huntress. He wasn’t going after the consumer side of the business and he wasn’t going after the large enterprise side of the business. He was targeting the SMBs and the service providers.
“We’re really here because we have to give a voice to the 99% that nobody else cares about – the small business to small enterprise – companies below 2,500 employees that Silicon Valley doesn’t care about.”
The Before Times: Bankers, Investors Don't Care about MSPs
It was a story that bankers and investors didn’t necessarily know or understand, and so Hanslovan had his work cut out for him back then. Behind the scenes he was pitching all the investment bankers and market analysts. It wasn’t something that was easy or intuitive for him.
“I’m a tech nerd through and through,” he said. “Raising money – I’ve had to learn it. I’ve never hired a banker. I’ve done all of it on my own.”
Back during that first round of raising funds, it was tough, Hanslovan said.
“I’ve probably been told ‘no’ about 60 times,” he said. At one point in 2018 he considered just giving up and selling to two-factor authentication provider Duo. But fate intervened and Cisco acquired Duo before the Huntress acquisition was complete.
“We went all the way to the point where we were going to get acquired and then Cisco bought Duo and we stepped back,” Hanslovan said. “That’s how close it came for Huntress almost throwing in the towel.”
That seems like a long time ago now.
Today's MSP Funding Gold Rush
Now investment bankers, private equity and so many others have recognized the value of managed service providers to the overall market. These are the companies that protect SMBs from cyber attacks. Hanslovan told ChannelE2E that investors now are looking to “pour truly hundreds of millions of dollars only into MSPs. And this is all brand new.” Hanslovan doesn’t claim credit for this, but he says “we were just the match that lit the fire. All the gasoline that has burst is all the hard work by the MSPs, the channel companies, and also by the hackers. Hackers are doing a really good job of driving attention to this market.”
For this D round of funding Hanslovan didn’t have to seek out the investment bankers and venture capitalists. They are the ones that tracked him down.
“This round I didn’t even raise money. I had six term sheets show up. Two of the competitive investors found out they were competing against each other and showed up in Oregon (where Hanslovan lives) with a joint term sheet and were like, ‘we are going to make you a deal you can’t refuse.’”
Hanslovan said he already had $77 million in the bank and did not need this round. But he decided to add the additional $150 million “because I looked at the pace that hackers are moving. I just made the decision that if I don’t take a little bit more risk and spend to educate a little bit better and build more projects, there’s going to be a hell of a lot of companies that just keep getting wrecked because the hackers are getting better and better.”
Hanslovan has been posting about these smaller cyberattacks on LinkedIn to raise awareness.
“Threat actors realize they don’t need to hunt the big elephants. They can go after smaller dear and rabbits and if they kill enough of them it’s the same amount of meat, right? It’s the same amount of cash.”
