6 Things to Know About the Upcoming SentinelOne IPO
SentinelOne is the latest in a growing number of cybersecurity companies going public.
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In its SEC filing, SentinelOne outlined key elements of its growth strategy.
One is continuing to innovate and enhance its cybersecurity and data platform.
“We will continue to expand our platform and its extended detection and response (XDR) capabilities, and develop new modules to include greater functionality and address additional use cases,” it said. “Through our convergence of cybersecurity and data, we intend to bring our customers and prospects a variety of differentiated cybersecurity-first and enhanced data analytics offerings. Having access to some of the world’s top cybersecurity and AI talent allows us to conduct extensive R&D to maintain our leading position.”
Other growth strategy elements include driving new customer acquisition, increasing adoption within its customer base, and expanding its total addressable market through acquisitions. In addition, it plans to expand its global footprint.
Substantially all of SentinelOne’s sales go through its channel partners. That includes resellers, distributors, MSPs, MSSPs, MDRs, OEMs and IR firms.
“And we expect that we will continue to generate a significant portion of our revenue from channel partners for the foreseeable future,” the company said. “Our channel partners generated 92% and 96% of our revenue for fiscal 2020 and fiscal 2021, respectively. Our channel partners generated 95% and 91% of our revenue for the three months ended April 30, 2020 and 2021, respectively.”
SentinelOne’s two largest partners are Exclusive Networks and SHI.
“We intend to continue to build our relationships with our channel partners, including MSPs, MSSPs, MDRs, OEMs, and IR firms, as well as our alliance partners to expand our market reach,” the company said.
As of April 30, SentinelOne had over 4,700 customers, increasing from over 2,700 a year ago.
“Our AI-and automation-driven approach to cybersecurity has been adopted by some of the world’s largest and most demanding organizations,” the company said. “As a result, we have grown rapidly since our inception.”
SentinelOne’s revenue for fiscal 2020 and fiscal 2021 was $46.5 million and $93.1 million, respectively. That represents 100% year-over-year growth.
Its revenue for the three months ended April 30, 2020, and April 30, 2021, was $18 million and $37.4 million, respectively. That represents 108% year-over-year growth.
“During this period, we continued to invest in growing our business to capitalize on our market opportunity,” it said. “As a result, our net loss was $76.6 million and $117.6 million for fiscal 2020 and fiscal 2021, respectively, and $26.6 million and $62.6 million for the three months ended April 30, 2020 and 2021, respectively.”
According to IDC, the addressable market addressed by SentinelOne’s solutions is expected to reach $40.2 billion in 2024, growing at a compound annual growth rate (CAGR) of 12% between 2021 and 2024.
Its addressable market represents revenue from the following markets:
Corporate endpoint security. That market is $9.7 billion and growing to $12 billion in 2024.
Cybersecurity analytics, intelligence, response and orchestration. The market is $13 billion and growing to $17 billion in 2024.
IT operations management. It’s now a $6 billion market and growing to $11.1 billion in 2024.
“We believe IoT security represents another incremental market opportunity, which we address through our Ranger modules,” the company said. “By empowering MSPs, MSSPs, MDRs, and IR firms with our technology and through our deep partnerships with them, we benefit from the market penetration of those entities.”
IDC estimates the managed security services market alone will grow to $44 billion by 2024.
“In addition to these markets, we believe several adjacent markets, including threat intelligence and data loss prevention (DLP), will be addressable by us in the future as we continue to innovate and build out our capabilities and offerings,” it said.
SentinelOne also said its XDR capabilities position it well to consolidate and unify spending across numerous security categories.
“Over time, we believe this unification and re-architecture of the prevention, detection and response paradigm will create new opportunities for additional products and features for us,” it said.
In its SEC filing, SentinelOne outlined risk factors to its business. For example, it has a limited operating history, which makes it difficult to evaluate its business and future prospects, and increases the risks associated with investors.
“We have a history of losses, anticipate increases in our operating expenses in the future, and may not achieve or sustain profitability,” the company said. “If we cannot achieve and sustain profitability, our business, financial condition and operating results will be adversely affected.”
Moreover, SentinelOne faces intense competition and could lose market share to its competitors, “which would adversely affect our business, operating results and financial condition.”
SentinelOne is the latest in a growing number of cybersecurity companies that have made the decision to go public. Darktrace, an AI company that specializes in cyber defense, went public in April and saw its stock perform well on the London Stock Exchange.
In addition, KnowBe4‘s IPO was a hit with investors when it became a public company in April. Stu Sjouwerman, KnowBe4’s founder and CEO, said partners will benefit from the company going public.
Moreover, McAfee went public last October. Parizo called it a “solid, but not spectacular” Nasdaq debut.
SentinelOne is the latest in a growing number of cybersecurity companies that have made the decision to go public. Darktrace, an AI company that specializes in cyber defense, went public in April and saw its stock perform well on the London Stock Exchange.
In addition, KnowBe4‘s IPO was a hit with investors when it became a public company in April. Stu Sjouwerman, KnowBe4’s founder and CEO, said partners will benefit from the company going public.
Moreover, McAfee went public last October. Parizo called it a “solid, but not spectacular” Nasdaq debut.
SentinelOne has filed for an initial public offering (IPO) with a goal of raising $100 million. It’s the latest cybersecurity company in the channel to initiate an IPO.
SentinelOne filed its registration statement with the U.S. Securities and Exchange Commission for an IPO. It hasn’t yet determined the number of shares and the price range for the proposed offering.
SentinelOne’s stock would trade on the New York Stock Exchange under the ticker symbol “S.”
Tomer Weingarten is SentinelOne‘s CEO and founder.
“The world is full of criminals, state actors and other hostile agents who seek to exfiltrate and exploit data to disrupt our way of life,” he said. “Our mission is to keep the world running by protecting and securing the core pillars of modern infrastructure: data and the systems that store, process and share information. This is an endless mission as attackers evolve rapidly in their quest to disrupt operations, breach data, turn profit and inflict damage.”
Last November, SentinelOne said it raised $267 million in Series F funding. Since February 2020, the company’s valuation has tripled, exceeding $3 billion.
SentinelOne protects enterprises from ransomware and other malware. The late-stage startup helps organizations secure their data using artificial intelligence (AI) and machine learning (ML).
Delivering ROI to Investors
Eric Parizo is principal analyst of Omdia’s cybersecurity operations intelligence service. He said the SentinelOne IPO is driven by the desire to deliver maximum possible ROI to its investors.
Omdia’s Eric Parizo
“As one of the few remaining independent pure-play endpoint detection and response (EDR) vendors, SentinelOne has already taken in nearly $700 million in venture capital funding,” he said. “That means to pay off its investors and ideally deliver them a profit, it would need a multibillion-dollar acquisition, or an IPO.”
SentinelOne’s biggest challenge going forward could be joining the fray in extended detection and response (XDR), Parizo said. That’s a broader and more well-heeled competitive landscape.
Top-tier vendors like Palo Alto Networks, Fortinet and Trend Micro are making XDR a centerpiece of their solution strategy.
SentinelOne must differentiate based on specialization and independence, Parizo said.
“This is not an impossible task, but it is a difficult one indeed,” he said.
S&P Global’s Fernando Montenegro
Fernando Montenegro is principal analyst of information security at S&P Global.
“There is significant awareness of cybersecurity as a key strategic issue for most organizations,” he said. “This was already a factor before the pandemic and now even more so, as the increased dependence on technology makes it even more important for organizations to secure their systems. With this dynamic in mind, interest in security vendors grows significantly, which ties to strategic transactions such as M&A and IPOs as we’ve seen with SentinelOne.”
Scroll through our slideshow above for more about SentinelOne and its IPO filing.
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