in August New York private equity firm Welsh, Carson, Anderson & Stowe acquired a majority stake in the company, buying out venture capital shareholders such as Mercury, Updata Partners in Washington, D.C., and Covera Ventures in Austin. Terms of the deal were not disclosed.
Hall says an IPO is still possible in the next few years. In the meantime, he says the company will use the funding to expand into its first international market, the United Kingdom, sometime in 2014.
Alert Logic was founded 2002 by Misha Govshteyn and Matt Harkrider, who both worked at Reliant Energy Communications in Houston. While other companies had used the software-as-a-service model for specific security functions—Proofpoint with e-mail security, for example—no company was offering comprehensive packages that would secure an entire corporate network. The security market was dominated by software vendors. But with more and more businesses turning to the cloud, the need for security gets more acute year after year, Hall says.
“Most business customers don’t have the expertise internally,” he added.
Hall came to Alert Logic in 2009, taking the reins from Govshteyn, who is now the company’s chief strategy officer. Before signing on as the security firm’s CEO, Hall had in 1999 co-founded Vericenter, a managed hosting provider that was bought by SunGard Data Systems in 2007. After the sale, he became the executive-in-residence at Fidelity Equity Partners, a $500 million middle-market buyout fund backed by Fidelity Investments.
As Alert Logic’s CEO, Hall began issuing earnings reports, even though, as a private company, it isn’t required to do so. “Our customers depend on Alert Logic to keep them secure and they need to know our business is healthy and growing,” Hall says. “We believe we will be a public company someday. The discipline of communicating to the outside world is an important discipline to keep.”
Last week, Alert Logic reported that, for the quarter that ended on September 30, it had revenue of $10.8 million, an increase of 40 percent from the second quarter of 2013.
Though Alert Logic now has more than 200 employees and 2,300 customers, the initial response from venture capitalists was less than enthusiastic, recalls Garrou, who is also an Xconomist. The company had raised $1 million from angel investors in Houston in its first three years.
“They had pitched 50 VCs prior to speaking to Mercury,” he says. “The response from most of them was that the world doesn’t need another security software platform.”
Garrou adds, clearly, the nay-sayers missed the bigger picture.
