Herndon cybersecurity company Expel Inc. said it's raised $140.3 million in late-stage funding, bringing its valuation above the $1 billion mark.
The round was led by CapitalG, the growth fund for Alphabet Inc. (NASDAQ: GOOG), in partnership with Paladin Capital Group, a D.C. investment firm that's focused on the cybersecurity sector. Both firms have led previous rounds for Expel — Paladin in the company's Series A round in 2016 and CapitalG in a $50 million round last May, when its general partner, Gene Frantz, joined the local company’s board. Cisco Investments, March Capital, Index Ventures, Scale Venture Partners and Greycroft also took part in this most recent round.
All told, the company has now raised $257.9 million in venture funding. It said it's achieved a valuation of more than $1 billion, joining the roughly 1,000 startups around the world that have done so — a group that has been growing quickly even amid the Covid crisis. This was the second funding round Expel itself has completed during the pandemic.
CEO Dave Merkel said despite the challenges, the last year-plus saw customers' need for cybersecurity services intensify and Expel's own investments in automation technology grow.
“These past two years have presented unique challenges that, I think it’s safe to say, most of us couldn’t have anticipated,” Merkel said in a statement. “Yet, during this time, we scaled our platform to handle an 82% increase in security events a day, doubled the number of technology partners and more than doubled the number of security investigations.”
The 5-year-old company plans to put this new funding to work furthering its product research and development, while investing in marketing, business operations and international growth.
Expel has already seen some customers from places like Canada, Australia and the U.K., and Merkel sees enormous growth potential in the international market, from the likes of Japan, Germany, France and elsewhere, he told the Washington Business Journal in an interview. As to where they'll expand next, privacy and data protection laws and other differences will be important in that discussion, he added.
"We'll be considering all of those different criteria as we figure out which countries [do we expand to] in which order?" Merkel said. "And then which ones do we have to think about a little bit more longer term, because maybe there are some additional things we have to go do to be able to sell effectively to them."
Customers can also expect the rollout of new products in 2022 and going forward to keep up with cloud changes and other common security needs. "Expect us to be very aggressive and continuing to deliver high value as all these different cloud platforms — AWS, GCP, Azure — continue to evolve," he said.
On the home front, Expel has gone through many of the same work-life changes most companies have with the pandemic. Early last year, the company said it was planning a $1.4 million office expansion, adding 6,000 square feet to its 24,000-square-foot home at 12950 Worldgate Drive. Expel also expected to add 164 new jobs in engineering, IT, marketing, sales and customer experience within the next three years.
“There's a fantastic pool of tech talent located in Northern Virginia, and we have close proximity to strong education institutions and major tech companies,” Merkel had said at the time.
Then, just weeks after Expel announced its expansion plans, the Covid-19 pandemic hit and everything changed; its office expansion plans were put on hold, workers went home, and Merkel doesn't think they will ever go back to a fully in-person team. Before the pandemic, one-third of employees were based outside of Northern Virginia, and now about half the company's employees are based outside the region.
Expel has continued to hire through the pandemic, although through the first half of 2021 it did so more conservatively than initially planned. "Now, the pedal is pretty much pretty close to the floor in terms of moving pretty quick on expansion," Merkel said. The company currently has 280 employees and plans to grow to 304 by the end of 2021.
When asked whether an IPO or sale could be in Expel's future, Merkel said he's focused on growing the company so that he can provide investors with the best return.
"I want all the doors open," he said. "It's less about any particular thing. And it's more about maintaining options through, just, high performance."
