Barracuda Networks Inc., a provider of security and data-protection systems, raised $130 million from Sequoia Capital and Francisco Partners to speed global expansion and provide cash to founders and early employees.
Sequoia and Francisco, which first backed the company in 2006, increased their stake with this investment, though the valuation wasn’t disclosed. The Campbell, California-based company is also paying a cash dividend of 96 cents a share to existing shareholders, Chief Financial Officer David Faugno said in an interview.
Founded in 2003, Barracuda is profitable and generates hundreds of millions of dollars in annual revenue, selling security, spam-filtering and storage systems to more than 150,000 customers. In July, the company said co-founder Dean Drako was resigning as chief executive officer and a search was under way for his replacement. Faugno said that Barracuda hopes to announce a new CEO soon and, coupled with this investment, will then start looking toward an initial public offering.
“Setting up the business for optimal success is important so that when we do hit the public markets, the governance of the company and management structure is appropriate for making that leap,” Faugno said.
All three founders, including Drako, are staying on the board and still have significant ownership in the company, Faugno said. Sequoia, a venture capital firm based in Menlo Park, California, and Francisco, a private equity firm in San Francisco, already have seats on the seven-person board.
Barracuda, known for its advertisements in airports, has 1,000 employees in 16 countries, and sells its product through partners in 80 countries. Competitors include Palo Alto Networks Inc. (PANW), which sold shares to the public in July, Juniper Networks Inc. and Check Point Software Technologies Ltd.
The new funds will help Barracuda expand its sales, development and support operations and may also be used for acquisitions, Faugno said. The company is investing in all of its products, which include hardware appliances, virtualized backup and recovery systems and cloud-based software. In particular, the product is gaining traction in the small and medium-sized business market.
“They’ve done a wonderful job of putting together a value proposition and creating a solution that’s often a 10th the cost” of traditional products, said Jim Goetz, a partner at Sequoia and a Barracuda director.
This investment “puts the company in position to go public, and we put in a governance structure that’s very different than the founder-controlled structure,” he said.
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