Tanium raises $100 million to let early employees, including co-founder, get cash

Key Points
  • The company wants to see more predictable revenue before it goes public.
  • CEO Orion Hindawi says Tanium has more than $300 million in the bank.

Orion Hindawi, the CEO and co-founder of cybersecurity start-up Tanium, wants to bring the company public -- but not quite yet.

Tanium announced on Thursday that it's selling $100 million of common shares to a group of investors led by TPG, which also led the company's last $148 million funding round in September 2015.

Unlike previous rounds, Tanium is not selling preferred shares (which give investors special rights) but common stock, and will use the money to give the ten-year-old company's early investors and employees -- including co-founder David Hindawi, Orion's father -- liquidity.

Orion Hindawi told CNBC that David is "taking about half of that, $50 million, and funding his charitable foundation, with that. The rest is going to early employees and investors." The foundation focuses on early childhood development and health, but the younger Hindawi declined to name it, saying that his father prefers to remain anonymous with his charitable giving.

Earlier this week, Hindawi told CNBC that going public is "the right thing for our company to do." He also said the company has more than $300 million in the bank and is cash-flow positive.

So if liquidity is the goal, and the company's finances are solid, why not go public now?

Hindawi said that he's looking for more predictable quarterly sales cycles. Right now the company's growth is driven mostly by new customers, and a huge deal at the end of the quarter could totally make or break the quarter, which could cause distracting swings in the stock price, he said.

'Our industry has really failed our market:' cybersecurity CEO

"I've seen a lot of friends who run companies in the last year go public before they were ready," he said. "In some cases it's really catastrophic."

He also contrasted Tanium's situation with other tech companies that have stayed private for a long time because their books look bad, and stay in business only because it's easy to raise more rounds from private investors.

He called these companies "non-profits masquerading as tech companies" and slammed the "corrosive" start-up environment in San Francisco today.

"People are starting companies because they want to hang a shingle out there, engineers are focused on comp packages and stock packages instead of product," he said. "This was never permitted 30 years ago, even 15 years ago. There's a reckoning coming, and we kind of deserve it."

`Reasonable up round'

Tanium's valuation has hardly budged since its last raise, standing at $3.75 billion in the current round versus $3.5 billion 20 months ago, but the valuations aren't directly comparable since common stock tends to trade at a discount to preferred stock. Still, that's a sharp contrast to its trajectory in 2015, when it doubled its valuation in a mere five months.

"I think there's a lot of precedent in the market for people being really disciplined about examining exit strategies and valuations of companies," Hindawi said. "Many companies have raised pretty substantial down rounds. We would consider this a reasonable up round considering it's common versus preferred."

Tanium specializes in endpoint security, meaning that companies and government organizations use it to monitor PCs and virtual machines for evidence of cyberattacks, malware infections and other software problems. It claims to have a number of large enterprise customers, including in government and banking.

However, the company's image was bruised by a recent report that called attention to Hindawi's aggressive management style and claimed the company was suffering executive attrition because of it.