Seattle hybrid cloud security startup ExtraHop touts bookings growth, says it’s on an IPO path

ExtraHop now has 400 employees mostly in Seattle, and plans to hire more than 150 this year. (ExtraHop Photo)

After plunging into the network security market nearly two years ago, Extrahop’s bookings have topped the $100 million mark, and now CEO Arif Kareem thinks the company is primed for the public market.

The downtown Seattle company has grown to over 400 employees, and it now plans to hire more than 150 new employees in 2019 coming off growth in bookings for its security technology, which uses machine learning to help companies detect and eliminate threats on their networks. Bookings — what a customer has promised to pay, as distinct from actual revenue — is a notoriously imperfect measure of success in the software-as-a-service world, but that doesn’t mean Extrahop isn’t seeing a lot of momentum going into the new year, Kareem argued in an interview with GeekWire.

“We are building a very solid organization with a solid foundation,” Kareem said. “We believe that that will put us in a position to go to the public markets and potentially have an IPO, by 2020 or within 24 months.”

ExtraHop’s products scan customer networks for harmful or poorly performing applications circulating on those networks, using machine-learning techniques to help sort the huge amount of network data generated by enterprise companies. The company originally launched this technology as a way of helping companies managing their own servers find performance roadblocks, but has since expanded that to the cloud as well as hybrid cloud environments.

Unlike the traditional network monitoring market, the market for security tools continues to expand as more companies transition to cloud computing and need to find new approaches. And there are lots of startups pitching machine-learning tools for security analysis, given that fear has always been one of the best-working sales tactics in the history of the planet.

After he became CEO of Extrahop (ranked #23 on the GeekWire 200 startup list) in 2016, Kareem realized that the company needed to find a faster-growing market that also had much more long-term potential, and given the network-analysis tools the company had already built security seemed like a great fit, he said.

“We continue to gain share (in performance management) but the company’s primary focus has moved toward security,” Kareem said. ExtraHop signed 20 deals worth more than $1 million during the second half of 2018, he said.

(L to R): ExtraHop executives Jesse Rothstein CTO and co-founder; Arif Kareem, CEO and President; Raja Mukerji, Chief Customer Officer and co-founder (ExtraHop Photo)

ExtraHop has raised $61 million in funding since it was founded in 2007, with its last round of $41 million coming in 2014. The company is running at cash-flow breakeven, and a strong cash position gives it the flexibility to invest where needed without having to tap additional private sources of funding, Kareem said.

“ExtraHop now has the scale, growth rate and profitability characteristics that position the company for a potential IPO,” said Matt McIlwain, managing director of Madrona Venture Group, in a statement. Madrona was an early investor in the company, and other investors include Meritech Capital Partners, Technology Crossover Ventures, and Andreessen Horowitz.

2019 might be a rocky year for IPOs, given that the ongoing government shutdown is delaying the filing process and the general sentiment among many in the business world that we’re overdue for a recession. But assuming it can ride out any troubles ahead, ExtraHop could emerge from the other side of any upcoming downturn in an enviable position before investors looking for growth opportunities.

“I’ve lived more than half my life in the Pacific Northwest and it’s a matter of pride for me to build a strong company here in Seattle, and take it to the next level,” Kareem said.