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Carbon Black's long road to IPO

Source: Nasdaq

Cybersecurity company Carbon Black went public on Friday, raising $152 million in its IPO and closing its first day of trading up 26%.

Big picture: This was one of the first companies created on the thesis that traditional anti-virus software didn't work, but for a while it looked as if it had actually launched too early.

Mall rats

  • Carbon Black (then known as Bit9) was founded in a small office in East Cambridge, Mass., further incubated in the suburban Boston offices of venture capital firm Highland Capital Partners, and later would move into space inside an old shopping mall.
  • Among the "mall employees" was Dropbox founder and CEO Drew Houston, who eventually left to pursue his storage startup idea full-time.
  • Highland's Paul Maeder says that CEO Patrick Morley reached in early 2014 for additional funding, but Highland no longer had enough money in the fund that had originally invested 10 years earlier. Morley told Maeder the company's entire future was at stake, and asked him to consider investing out of a newer fund — a complicated cross-fund investment plan that VCs usually try to avoid. But Maeder decided to negotiate with investors to make it work.
  • Soon after, Bit9 acquired Carbon Black, a smaller Pennsylvania startup whose CEO had experience at both the NSA and CIA. The combined company was initially called Bit9 + Carbon Black, but eventually went simpler. "Carbon Black is just a much better name," Maeder says.

Going public

  • The company first began prepping for an IPO nearly two years ago, going so far as to hire bankers, but then held off so that it could purchase and integrate an antivirus company called Confer.
  • It's still unprofitable, but revenue climbed from $116 million in 2016 to $162 million in 2017.
  • Carbon Black had a fully-diluted market value of $1.6 billion at its IPO price, and it now stands at over $2 billion.
  • Maeder: "The two worst things to be as a startup is too early or too late. Too late you can't recover from, but you can survive too early if you have a great CEO and loyal investors."
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