'Everybody Loves A Winner:' Carbon Black Stock Soars Upon Going Public, Company Plans Global Push

Carbon Black plans to put the channel front-and-center as it uses some of the proceeds from its initial public offering to expand its footprint outside the United States.

The Waltham, Mass.-based endpoint security vendor saw its stock surge $4.94 (26%) to $23.94 Friday in its first day of trading on the Nasdaq Global Select Market. Carbon Black had priced its initial public offering of eight million shares at $19 each, putting the company on track to raise $152 million with a likely valuation of $1.5 billion.

"Everybody loves a winner," said Tom Barsi, Carbon Black's senior vice president of corporate and business development. "We're the first next-generation endpoint player to go public. A lot of our partners and customers have invested in us, and now they're sharing some of that success with us."

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Much of Carbon Black's future growth is positioned to come from outside the United States, which only accounted for 12 percent of Carbon Black's revenue in 2016, according to a registration statement filed with the U.S. Securities and Exchange Commission (SEC).

Channel partnerships will be central to Carbon Black's foreign expansion, Barsi said, with the company seeing great opportunity to leverage existing relationships with NTT Data and Dimension Data in a more global manner. The company's fastest-growing region is Asia-Pacific and Japan, Barsi said, with Carbon Black establishing a headquarters in Singapore and opening offices in Tokyo and Melbourne since 2015.

"The whole reason this has been a hot space lately is people are realizing that the market is broken," said Paul Morville, vice president of product management.

Channel partners were involved in 94 percent of the business Carbon Black closed in the final quarter of 2017, according to the SEC filing. The company has more than 350 VAR, distribution, MSSP and incident response partners, with the number of customers with subscriptions through the channel skyrocketing from 1,420 in 2015 to 3,472 in 2017.

Carbon Black said it works with more than 200 security-focused VARs including Optiv, CDW, Dimension Data, and SHI International, and 130 MSSPs including IBM, Secureworks and Trustwave. Optiv has gone from accounting for 35 percent of Carbon Black's revenue in 2015 to 27 percent in 2017, though the company's overall sales skyrocketed from $70.6 million to $162 million during that time.

"Legacy A/V [anti-virus] is broken, and it doesn't work. And it's well-documented that all it does is block known bad," Barsi said. "The opportunity for our channel partners is to rip and replace Symantec and McAfee and Trend [Micro], and deploy a modern, effective solution."

Carbon Black was founded as Bit9 in 2002, raised $191.7 million through 17 rounds of funding, and formally changed its name to Carbon Black in February 2016 following the merger with a start-up by that name.

Since then, several other firms have also established a foothold in the next-generation endpoint security space and raised at least $100 million in outside equity, including CyberArk, Cybereason, Cylance, and SentinelOne. All of these firms have eschewed signature-based anti-virus offerings for technology that's more predictive and able to anticipate what a bad actor is going to do next.

"We created the EDR [endpoint detection and response] space, and we're the undisputed leader in EDR," Barsi said. "There's a tremendous opportunity to really change the game."

Carbon Black is the second cybersecurity vendor to go public this year, with rising cloud security star Zscaler raising $192 million in a Nasdaq public offering in March. Additionally, endpoint security behemoth Avast applied last month to have its shares listed on the London Stock Exchange, and is looking to raise $1 billion in primary and secondary sales.

Optiv's Todd Weber would like to see the infusion of capital accelerate Carbon Black's migration to a single, unified endpoint platform. From there, Weber hopes Carbon Black uses the money to become more of a complete endpoint solution developer beyond protection and visibility, establishing a foothold in areas like patch management or getting into network and automation function.

From a partnership standpoint, Carbon Black has done everything Optiv has asked from them, providing enablement around products, platforms and services, said Weber, Optiv's vice president of partner research and strategy.

"Carbon Black has been a great proponent of the channel, and very supportive of our efforts," Weber said. "This affords them the ability to take their product to new heights."