KnowBe4 IPO to Provide More Resources for Partner Success

A hit with investors, the KnowBe4 IPO Thursday will also benefit partners, the company’s CEO says.

According to Yahoo! Finance, KnowBe4 shares opened nearly 25% above their $16 offer price on the Nasdaq. Backed by global investment firm KKR, the cybersecurity training company gained a valuation of $3.56 billion in afternoon trading when its shares were up 33%.

Earlier reports said KnowBe4 was preparing its IPO last fall.

Last month, KnowBe4 announced it would acquire MediaPro, a security and privacy training solutions company. It will help KnowBe4 expand in the security awareness training market.

The company remained in a quiet period until now. Stu Sjouwerman, KnowBe4 founder and CEO, spoke with us about the significance of Thursday’s IPO.

Channel Futures: What made this the right time for the KnowBe4 IPO?

KnowBe4’s Stu Sjouwerman

Stu Sjouwerman: International expansion, that was definitely the No. 1 reason why we said yes, we’re pulling the trigger, we’re doing this. The other thing is M&A opportunities. We don’t have anything immediately like, yes, we’re going to buy company so and so. But we’re always looking at good M&A candidates. But by far, international expansion is No. 1.

CF: Do you have any specific plans for the money you raise from the IPO?

SS: If you look at international expansion, we have a unique kind of industry where translations just by themselves are not enough. You really need to localize, and that means you can’t send a Bank of America phishing test to France. It needs to be a French bank and it needs to be French-translated all the way from the beginning until the end. We have to close the loop all the way. So that’s where a bunch of resources are needed.

CF: What will the KnowBe4 IPO mean for your partners? Will they benefit from this?

SS: Absolutely. We like to think we are really channel-friendly. Most people don’t know, but I came up through the channel. I worked in a reseller. I worked in a distributor. And I know what it’s like to get good support from U.S. companies who usually come up with the products. We want our channel partners to be successful. And so the IPO gets us more resources to help everyone get localized collateral, for instance, to help local marketing.

CF: Will going public give KnowBe4 a competitive advantage?

SS: Well, internationally, I am hoping that us becoming a public company in the United States will create sufficient credibility and trust so that international companies are willing to deal with us because there are concerns about privacy in our international markets. And we have to comply with Sarbanes-Oxley and a whole series of privacy requirements. We are super-focused on making sure that their company data is well protected. And so being public, that helps us a lot.

CF: In the months ahead, can we expect to see increased growth and expansion as a public company?

SS: We plan to continue to go on our trajectory, which since five years ago has been hockey-sticking. And we feel there are still huge opportunities, especially for channel partners, because this is a fantastic platform to go out with. This is the kind of thing you want to promote to your existing customer base, but also get new customers leading with this because it’s got fantastic ROI, it’s a no-brainer price, and you can layer on consulting or services that will bump up the price even more. We have hundreds of MSPs that do fantastically well with this platform.

CF: You mentioned M&A. Are there particular types of companies, particular regions and/or particular types of capabilities you’re looking for?

SS: Well, in the past, our M&A candidates have mostly been content providers that were sitting in a key geography like …

… Germany or the United Kingdom, or South Africa in Cape Town, actually. And so we acquired them to expand on our what we call the ModStore, which is a takeoff on the App Store, with all the training and other awareness modules. So we have almost 1,200 different training capabilities. Call them “artifacts” as an umbrella term because it’s training, it’s games, it’s PDFs with newsletters, etc. That’s the kind of stuff that partners can use to do the marketing to their own as their own go-to-market strategy.

CF: Are there any potential drawbacks, challenges with going public?

SS: Well, you are living in a glass house, so everyone is kept on their toes and we are expected to perform. Now, obviously, we’re a SaaS company, so we do have fairly good visibility into the future. So I don’t expect any actual problems.

CF: What’s ahead for KnowBe4 now that it looks like we’re getting the pandemic potentially under control, vaccinations are increasing, and people can start getting back out?

SS: Obviously in [the second quarter of] 2020, everyone got a dip in productivity because everyone was moving to the house. In our case, people were awareness trained in the office and certainly they were in a completely new environment with often much more distraction. So we came out with a new training module to quickly jump in on that new challenging work environment. And so I don’t expect this to go normal, back to the office any time soon. … There is no old normal.

We expect there will be a hybrid kind of setting where some people work from the house, some people from the office. Or maybe two or three days at the house and in the office. And in any scenario there, you still need to train people very, very well within an inch of their lives I want to say, because the bad guys are now really focusing on that employee and they know that this person is now at the house. So for instance, in the initial stage, COVID-19 phishing attacks went up with 600%. That’s no longer the case, but it’s still the biggest attack surface and then the weakest link. And what we try to do is train those employees because data breaches are the big problem.

If you look at the amount of money spent on information security tools over the last say eight years, it goes up. But the data breaches are going up even faster, and over 50% of data breaches are caused by humans. So you need to train those humans to become a strong human firewall, a strong last layer of defense, and that will drive that those data breaches down. That’s our main focus at the moment.