Industry-development group AustCyber is succeeding at luring US-based venture capitalists to our shores, the head of secure-coding success story Secure Code Warrior has said after scoring the largest VC funding round in Australia’s history.
Secure Code Warrior’s (SCW’s) Series B $70m ($US48m) funding round – driven by Goldman Sachs, ForgePoint Capital and Cisco with increased commitments from previous Australian backers AirTree Ventures and Paladin Capital Group – is one for Australia’s record books but co-founder and CEO Pieter Danhueix says the strong interest is no accident.
“Extremely good” market conditions were providing favourable valuations, he said, and “there is a lot of US-based interest in Australia, which is very different than two to three years ago when you didn’t really see any investment or VCs roaming around here.”
“I think that has changed a lot, and it’s thanks to AustCyber and [CEO] Michelle Price.”
AustCyber – which this month appointed former Heart Foundation ACT CEO Tony Stubbs as chief operating officer – advocates tirelessly for Australian security start-ups and has run two AustCyber Project Fund rounds since its establishment in 2017, providing $6.5m to seven projects in its first cohort and $8.5m in a second round that is yet to be awarded.
The team’s strong support of companies like SCW had been a big help, said Danhieux, who attributes the company’s success both to servicing its core market of developers – more than 200,000 of which have adopted its secure-development tools – and to “making choices on what not to do rather than trying to do all things at once.”
Spending wisely was critical after the September 2018 Series A funding round that saw Sydney-based AirTree and Paladin backing the company to the tune of $US3.5m ($A5.1m).
That backing helped SCW gain momentum, winning tier-one customers including Telstra, Woolworths, Xero, and ING Bank.
It also opened a second Sydney office to accommodate a team that has grown by more than 150 per cent over the last year – including a 30-strong R&D team into which the company reinvests 35 per cent of its revenues.
Despite enthusiastic customers, the company waited to pursue a second round of funding “until we were generating quite a lot of revenue”, Danhieux said.
“By only raising a minimal amount of money, it allowed us to grow and keep control of our destiny.”
“We wanted to stay in Australia as a management team and not be forced to go overseas, which often happens with Australian start-ups.”
With the company now “growing really fast”, Danhieux expects the current 120 staff will more than double next year.
SCW will bolster its efforts in the US market – from which it already derives half of its revenues – and expand into Asia-Pacific markets via Singapore, with “roughly” 250 staff by the end of next year as it pivots toward Europe.
Facing the challenges of global growth
SCW currently has 70 positions available and finding suitable staff to fill them “is absolutely one of our biggest challenges”, Danhieux said, noting that half of the company’s 10-strong HR team are recruiters working to identify and hire talent.
With staff spread across offices in Boston, Denver, Portland, London, Belgium, and South Africa, Sydney-based management have embraced the cultural challenges of a company where staff don’t see each other every day.
“We spend a lot of time and effort investing in the people aspect, and making sure we have a consistent culture across the company,” Danhieux said.
“Running a global company has its own particular challenges.”
With an expanded and reinvigorated board at the helm, making the most of the latest funding injection will mean continuing to weigh opportunities against each other – but with a bit more wiggle room for aspirational moves.
Success will come from “the combination of finding the right partner, getting the right valuation in the market, and hiring a little bit more [skilled staff] than we need,” Danhieux said.
“There are always opportunities in the market to do small acquisitions or take a leap on things you otherwise wouldn’t have done, just because you have a reserve in your bank account.”