Snyk hasn’t been shy about taking money over the years, earning larger and larger returns on investment with each round, and with each round has come a correspondingly large appreciation in valuation. This time around, that particular streak ended, but Snyk secured another $196.5 million investment, with its valuation down about 12% to $7.4 billion since the last round in September 2021.
This previous round was $585 million with $300 million of primary funding and the remaining $230 million of secondary funding to pay off early investors and employees eager to see a return on their equity. Primary money came in at a valuation of $8.5 billion, up $1.1 billion from today’s round.
However, it’s worth noting that even with this round down, the previous round is up $3.8 billion from the March round. You can see the company’s rise up to this round in the chart below:
Snyk CEO Peter McKay says finding the right conditions was more important than increasing the valuation, especially in the current market. “So it was more important that we got the right terms than that I absolutely had to come up with $8.6 billion. If the market says you’re at 7.4 then we’re at 7.4,” he said.
Part of this is that even though the company is growing, the market has changed since the last round. “Despite the headwinds that I think everyone in the market is seeing, we’ve still been able to grow over 100% in new logos and revenue, so we’re very pleased,” he said.
The company still has most of the cash in the bank from last year’s round, but they saw an opportunity to raise more cash, which could help them grow the platform both organically and through acquisitions.
“What you do with a market like this is you focus on efficiency in your business, you focus on getting to free cash flow faster. They make sure your balance sheet is as strong as possible. And you’re opportunistic,” he said.
He sees that Snyk’s developer security market remains fragmented and sees an opportunity to consolidate, buying companies when it makes sense and capitalizing on what he believes is a very large TAM. McKay says the company has tripled in size since its last funding round, from 400 to 1,200 employees, but he sees opportunities for the company to be more efficient for investors in other ways by aiming to reach breakeven cash flow by 2024 prime example.
Most security startups either grow into a platform or get absorbed by one, and Snyk seems to want to be a platform player at this point. That money should help the company as it awaits a friendlier IPO environment in the stock market.
“We really didn’t set a time. We think there will be a wave [of IPOs] in the first half of 2023. We’ll be watching and seeing how they play out and based on that maybe we’ll make a decision about what we’re going to do… I don’t even want to speculate on a timing because who knows when that will be is ? Nobody has that answer,” he said.
Today’s investment was funded by new investors Evolution Equity Partners, G Squared, Irving Investors and Qatar Investment Authority. Existing investors Boldstart Ventures, Sands Capital and Tiger Global also participated. The company has now raised $1.075 billion.