Wednesday, December 13, 2017
Business

Armed with a star hacker brand, Clearwater tech firm KnowBe4 eyes a future IPO

CLEARWATER

At 59, serial entrepreneur Stu Sjouwerman is on his fifth startup. This one is called KnowBe4, a security awareness company that trains employees of subscribing businesses how not to get snookered by clever hackers masquerading online as do-gooders or perhaps even the company CEO.

The hackers' goal: to persuade workers to divulge corporate passwords and private data or, worse, wire money to the hackers by convincing employees they are following orders from up the corporate ladder.

This is not hacking in the traditional sense of cracking a company's IT firewall or infecting a computer network with a virus. This hacking is called "social engineering" and aims at getting company workers to do the wrong thing — while thinking they are doing the right thing.

KnowBe4 is growing fast, up 950 percent in the past five years, approaching 80 employees, and on a near-term mission to generate $1 million a month in sales. The company runs simulations of online attacks on client employees to see how many are vulnerable to such hacks, then provides training to help minimize such problems.

Sjouwerman's last business, a Clearwater cybersecurity firm called Sunbelt Software, reached 250 employees and was sold to a venture fund several years ago, netting Sjouwerman an eight-figure payout. The money was great, but handing over his business and its employees to a buyer was tough, he admits.

This time will be different, Sjouwerman insists. The company, located on the 12th floor of a downtown Clearwater building with stunning 360-degree views of the city, the Clearwater Memorial Causeway and the Clearwater Beach hotel skyline, won't be sold.

Instead, the CEO plans to grow KnowBe4 to $50 million in sales over the next four years and, markets willing, take the company public via an initial public offering, or IPO.

If that happens, Sjouwerman will, of course, thank his firm's growing staff for their dedication and smarts.

He will also thank Kevin Mitnick. Because Mitnick, who was the best-known social engineering hacker of modern times, is KnowBe4's special brand.

Unfamiliar with the name? Think of Mitnick as someone who could star in movie styled after Catch Me If You Can (which starred Leonardo DiCaprio in 2002) — if it was about a cyber thief able to talk his way past corporate security forces and past IT firewalls by exploiting the weakness of employees.

Mitnick employed his nefarious people skills in the 1980s and 1990s, penetrating the security systems of companies from Motorola and Sun Microsystems to Pacific Bell before he was caught and sent to prison. He was released under supervision in 2000 and, in the following years, has developed a lucrative business consulting for some of the bigger Fortune 500 companies, writing books and giving speeches.

The foreword of Mitnick's 2011 memoir — Ghost in the Wires: My Adventures as the World's Most Wanted Hacker — was written by an admiring Steve Wozniak, a co-founder of Apple.

Wozniak wrote:

"Kevin has become one of my best friends. … He has lived a life as gripping and exciting as the best caper movies."

Sjouwerman, on a social outing several years ago with Clearwater friends, was asked what he was doing and mentioned his new firm would focus on services to protect businesses against security intrusions like "phishing" (posing as a legitimate person or business to defraud someone online) and "spoofing" (pretending to be someone else using a fake email) among other things.

One of Sjouwerman's friends offhandedly suggested he should talk to her cousin: Mitnick. Long aware of Mitnick's reputation as a social engineering genius, Sjouwerman contacted him and offered him an ownership stake in the new company in exchange for his name and expertise.

It was a marketing coup.

Mitnick's title at KnowBe4 is chief hacking officer. He visits the Clearwater office on occasion from his West Coast consulting base and offers ideas on new products, Sjouwerman says. One of company's more popular products is called "Kevin Mitnick Security Awareness Training 2016."

Mitnick's photo is framed on the wall by the company's entrance. His cleverly designed metal business card includes a tiny set of lock picks.

In the cybersecurity world, the reformed Mitnick is now considered a rock star.

And that brand is a big plus for KnowBe4.

Consider Wednesday's headline that appeared online on the Forbes magazine website:

World's Most Famous Hacker Raises $8 Million To Play In Billion Dollar Training Market.

The Forbes story ran with a photo of a clearly younger Mitnick from 2000, wearing shades and standing outside the Los Angeles Federal Court building.

That's pretty cool marketing for KnowBe4, even if Mitnick is not the driving force in negotiating an $8 million funding deal.

Truth is, says Sjouwerman, KnowBe4 doesn't really need venture capital for the money. The entrepreneur started the business with his own wealth and the company is already generating millions in annual revenues.

But there are other reasons to win VC funding. An injection of funding from a sharp venture capital firm is not only another signal that a young company is worth investing in, the KnowBe4 CEO says. It also opens doors to other businesses and potential customers.

With the $8 million in new funding, KnowBe4 becomes the second investment by a new venture capital fund called Elephant Partners. Sjouwerman said the deal went smoothly because he got along so well with Elephant co-founders Andy Hunt and Jeremiah Daly.

The addition of venture capital backing also begins to set the stage for a KnowBe4 IPO down the road. If it happens. That's always a big if given the rapidly changing tech market, competitive pressures and a stock market that, at least for now, has proved chilly for young companies trying to go public.

But Sjouwerman has decades of experience. KnowBe4's bottom line is healthy. The company's staff seems loyal and dedicated to growing the business. So many former employees of previous startup Sunbelt Software are joining the new company that Sjouwerman calls it "putting the band back together."

And nobody else has the Mitnick brand.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

Comments
Florida hospitals call for more funding in effort to address looming doctor shortage

Florida hospitals call for more funding in effort to address looming doctor shortage

The number of doctors practicing in Florida has not kept up with the state’s surging population growth, and more money is needed to recruit and keep them here, hospital leaders said Wednesday.The shortage is particularly acute in four speciality area...
Updated: 5 hours ago
Allegiant Air mechanics ask to be represented by Teamsters

Allegiant Air mechanics ask to be represented by Teamsters

Allegiant Air mechanics filed with the federal government Wednesday to be represented by the International Brotherhood of Teamsters. If the petition is passed, the union would negotiate on behalf of the mechanics and related technicians on issues suc...
Updated: 6 hours ago
Federal Reserve boosts key interest rate for third time this year

Federal Reserve boosts key interest rate for third time this year

WASHINGTON — The Federal Reserve is raising its benchmark interest rate for the third time this year, signaling its confidence that the U.S. economy remains on solid footing 8˝ years after the end of the Great Recession. The Fed is lifting its short-...
Updated: 10 hours ago
Pasco Business Digest for Dec. 15

Pasco Business Digest for Dec. 15

Business digestWho’s newsHOSPITAL APPOINTS ASSISTANT CHIEF NURSING OFFICER: Registered nurse Courtney Stephenson, board certified nurse executive advanced, was recently appointed assistant chief nursing officer at Medical Center of Trinity. Stephenso...
Updated: 12 hours ago

Hernando Vendors for Dec. 15

Vendors are needed for the following nonprofit events:• Vendors and volunteers are being sought for a National Homeless Persons’ Memorial Day event from 8 a.m. to 3 p.m. Dec. 21 at Crescent Community Clinic, 5244 Commercial Way, Spring Hill. During t...
Updated: 12 hours ago
Tampa airport ranks No. 4 for most affordable parking rates

Tampa airport ranks No. 4 for most affordable parking rates

TAMPA — Holiday flight prices may be high, but parking rates at Tampa International Airport are a little more manageable. TIA has the fourth-cheapest parking rates in the country, a study by travel and expense app company TravelBank said. TIA, the st...
Published: 12/13/17

Hernando Business Digest for Dec. 15

EventsDISCOUNT OFFERED TO THOSE WHO DONATE TO HELP HOMELESS: In advance of National Homeless Persons’ Memorial Day, BonWorth clothing store, 12987 Cortez Blvd., Spring Hill, will offer a 10 percent discount on purchases to those who donate unwanted c...
Published: 12/13/17
Target aims to boost same-day delivery by acquiring Shipt

Target aims to boost same-day delivery by acquiring Shipt

NEW YORK — Target plans to boost its same-day delivery capability by paying $550 million for Shipt, its latest move to try to catch up with Amazon. Shipt delivers groceries to its members, who pay $99 a year. Target says it will add more products to...
Published: 12/13/17
Spirit Airlines names new president, CEO for 2019

Spirit Airlines names new president, CEO for 2019

Spirit Airlines, the South Florida-based budget airline, is gearing up for new leadership. Bob Fornaro, president and CEO since January 2016, will step down from his position in early 2019. He will be succeeded by Ted Christie, the airline’s current ...
Published: 12/13/17
Three things to watch for at the Federal Reserve meeting today

Three things to watch for at the Federal Reserve meeting today

WASHINGTON — On the day when Janet Yellen will hold her final news conference as Federal Reserve chair, the Fed has left little doubt what it plans to do Wednesday: Raise its benchmark interest rate for the third time this year. The increase would be...
Published: 12/13/17