Arctic Wolf Hunts Down $401M In Convertible Notes

Illustration of masked thief peeking through keyhole on laptop screen.

Another day, another big round to a Minnesota-based cybersecurity firm.

A day after Minneapolis-based NetSPI raised a $410 million growth investment from private equity giant KKR, Eden Prairie, Minnesota-based Arctic Wolf raised $401 million in convertible notes led by existing investor Owl Rock.

Convertible notes are something that could become more en vogue as the venture capital pullback continues (something we mentioned months ago). They work like a short-term loan, but convertible notes are repaid to the investor at a later point in equity—i.e. after an IPO—typically at a discount and can also include an interest rate.

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Convertible notes also can benefit the company in the sense of providing upfront cash without having any initial dilution.

A different time

In July 2021, the managed cybersecurity company raised $150 million at Series F led by Viking Global Investors and Owl Rock, taking the company’s valuation from $1.3 billion to $4.3 billion.

At that time, then-CEO Brian NeSmith said an IPO was likely the next logical move.

However, this is a much different time than July 2021 when it comes to venture capital and the public market. Funding to VC-backed cybersecurity startups is not nearly on the pace it was last year when it hit an all-time high of nearly  $23 billion. Through the first half of this year, startups had raised $10.3 billion, according to Crunchbase data.

In August, Nick Schneider was appointed CEO as NeSmith became executive chairman of the board.

Others participating in the convertible notes offering from Arctic Wolf include Viking Global Investors, the Ontario Teachers’ Pension Plan and funds advised by Neuberger Berman.

Founded in 2012, Arctic Wolf has raised nearly $900 million, according to Crunchbase data.

Further reading:

Illustration: Dom Guzman


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