NetSPI, a Minneapolis-based cybersecurity company, announced Wednesday that it has raised $410 million in growth funding from investment firm KKR.
The new financing adds to previous funds the New York City-based investment firm had invested in the company last year alongside cybersecurity-focused venture capital firm Ten Eleven Ventures, a deal that totaled $90 million, the Business Journal reported.
The new investment will go toward further developing NetSPI’s technology, making hires, expanding globally and recapitalizing the company’s first institutional investor, San Mateo, Calif.-based Sunstone Partners, according to the announcement. The company also plans to accelerate its growth through mergers and acquisitions, CEO Aaron Shilts said.
"Given some of the market volatility, the need for strong cyber companies is more than ever, the demand from our clients is higher than it's ever been," Shilts said in an interview.
Founded in 2001, NetSPI provides offensive security technology to discover gaps in security and reduce the likelihood of a security breach, the company says. It offers penetration-testing technology, sometimes known as ethical hacking, which essentially tests a clients’ cybersecurity efforts by simulating a hacking event, the Business Journal reported.
Its clients include those in the Fortune 500, financial institutions, health care organizations and cloud providers, the company says. It has 400 employees globally, 175 of which are based in Minneapolis, and offices across the U.S., Canada, the United Kingdom and India, Shilts said.
The company exceeded 50% organic revenue growth in 2021, and has seen 61% growth in 2022 to date, the announcement said.
It attributes its five-fold revenue growth in the past five years to its penetration-testing model, its acquisition of Silent Break Security, the introduction of its attack surface management service and several other factors.
In 2017, NetSPI raised funds from Sunstone Partners. The amount was not disclosed, but the private equity firm typically makes investments between $15 million and $75 million, it said at the time, according to the Business Journal.
The new investment from KKR recapitalized Sunstone Partners, meaning it no longer has an equity stake in the company, Shilts said.
KKR made its latest investment as part of its strategy to make equity investments in high-growth tech companies in North America, Europe and Israel, according to the announcement.
"We are excited to double down on our investment in NetSPI to help build a differentiated leader in offensive cyber security," Jake Heller, partner and head of KKR's technology growth team in the Americas, said in the announcement. "We have been very impressed by the performance of the company and the exceptional execution by Aaron and his team over the past 18 months. We believe this is just the beginning of what we can accomplish together."
The transaction expects to close by the end of the year. Law firm Goodwin Procter was NetSPI's adviser on the deal while Latham & Walkins advised KKR.
