New Arctic Wolf CEO Nick Schneider On Plans For ‘Significant’ Channel Investments, IPO

In an interview with CRN, Schneider discusses the security operations firm’s channel-driven growth strategy and taking the reins from Arctic Wolf Co-Founder Brian NeSmith.

Arctic Wolf plans to continue its aggressive pace of channel-boosting investments as the security operations firm eyes an initial public offering in the near future, new CEO Nick Schneider told CRN.

On Tuesday, Schneider was named CEO of Arctic Wolf, a provider of managed detection and response (MDR) and other managed security offerings that sells exclusively through channel partners.

“The channel has been a massive piece of our growth engine here as a company. It’s the cornerstone of the way that we build demand and find new customers—but also of the way in which we engage with our existing customers,” Schneider said in an interview with CRN on Tuesday.

[Related: Arctic Wolf Raises $150M On $4.3B Valuation To Fuel Tech M&A]

“As a result, we will continue to make significant investments to ensure that channel partners have what they need from Arctic Wolf,” said Schneider, who most recently had served as the company’s president and chief revenue officer. “For the channel partners that have been with us for a long time, there’s nothing but good news here. And for partners that are new or considering ‘joining the pack,’ I think they’ll be met with an experience that’s pretty rare in the channel.”

Schneider succeeds company co-founder Brian NeSmith, who had been CEO since the launch of Arctic Wolf in 2012. NeSmith is now serving as executive chairman of the company’s board of directors.

The change in leadership follows the $150 million Series F round of funding that Arctic Wolf raised in July—giving the Eden Prairie, Minn.-based company a $4.3 billion valuation along with funding to invest in growth.

In terms of an IPO, Schneider said that Arctic Wolf intends to go public within the next three to six quarters. The company is not disclosing revenue figures, but said in its news release Tuesday that it has seen 100 percent growth in annual recurring revenue, year-over-year, during each of the past seven years.

Along with its flagship MDR offering, Arctic Wolf provides offerings in managed risk, managed cloud operations and managed security awareness.

Schneider been with Arctic Wolf since 2016, when he joined as head of worldwide sales. He became chief revenue officer in 2018 and added president to his title this past February.

What follows is an edited portion of CRN’s interview with Schneider.

What does this change in leadership mean for your channel partners?

We’ve been a 100-percent channel company now for several years. Brian and I have shared in our philosophy that a 100-percent channel business is absolutely the way to go. It’s core to the way that we operate. So I don’t think there’s a massive change there, because we’ve been operating in that manner for five years. If anything, we’ll just further invest in the channel from where we are at today.

Brian and I have worked together really tightly for five and a half years—and even more so in the last two to three years—on really all aspects of the business. So as it pertains to the channel community, we’ve always shared a vision about the way in which we would go to market with our sales teams in conjunction with the channel community. And as it pertains to the vision for the company itself, the vision for our products, the vision for the platform—Brian and I are very tightly aligned there as well.

Will he (NeSmith) continue to be mainly focused on Arctic Wolf? Is he involved with any other companies?

He’ll focus the majority of his time on Arctic Wolf. This is really a matter of timing around our intent to become a publicly traded company. We wanted to make sure that the timing made sense. And we wanted to make sure that Brian and I could work together in the lead-up to an IPO—and then make sure that we were stable, from a leadership standpoint, from the point of IPO into operating as a publicly traded company. And that’s really it. Brian’s full intent is to remain engaged for the next few years as we both work through this transition—but also as we move from a private company to a publicly traded company.

Can you provide any sense of the timing for your IPO plans? Possibly within the next year?

Our intent is within the next, I would call it, three to six quarters. That’s probably the realistic window. But certainly, we are operating as a publicly traded company today. So I believe that we could be a publicly traded company today if we chose. But we want to make sure that we get everything set up properly to have the absolute best entrance into the market. And our belief is that timeframe is likely that three-to-six quarter window.

What are your plans for channel investments looking ahead?

We’ve built out a significant channel marketing function and we’ve built out a significant sales development function, which is reciprocal to our channel community. The channel team itself has more than doubled in a year, adding resources and capacity to the channel partners that we’re working with. And we’re starting to add some specialized roles around channel engagement, channel training and channel enablement, which we haven’t had previously.

I would expect those investments to continue—but also expect to see additional investments by way of strategic alliances or alliances in general, as well as engagement with our channel community. A lot of what we’ve done historically will continue. I think we’ll just continue to see growth with regard to the investment in the channel, and then a further breadth of opportunity for the channel community to engage with us as a company.

Are there MSP-specific investments that you’re making that you could discuss?

We’ve made some fairly sizable investments by way of both headcount in sales and marketing, but also headcount emphasis in the product and R&D functions. Those will result in more robust ways for us to engage with the MSP community in general—so think of things like ticketing or orchestration or automation around certain workflows. I would expect all of that to be on the horizon from us, with a continued focus on our three channel engagement models.

Are you continuing to see strong momentum in the enterprise space?

We’ve always been delivering our security operations platform really effectively to the mid-market/small enterprise. But we’ve seen a dramatic uptick in interest and in bookings up market. That’s a result of a lot of those organizations coming to the realization that the challenges the mid-market or small enterprises are having are the same challenges they’re having—just at a different scale. They’re looking for somebody to round out and/or become the cornerstone of their security operation. Thus far we’ve seen dramatic growth in the larger end of the market.

What’s your overall outlook for growth?

I expect the [strong growth] to continue—because the problem with cybersecurity has not been solved. The products, tools and the manner in which the industry has gone about solving the problem has been ineffective. Security operations is the answer.

Almost every day, there’s news of a new breach. But the cybersecurity industry is spending more money and developing more products that ever before. So clearly, just spending money and just adding more tools in your infrastructure environment is not solving the problem.

Our belief is that the real solution to the problem is to have a true security operation. And for a lot of companies, big and small, that is a big hill to climb. In almost every size of account, we’re adding a component to their security operation—whether it be the entire security operation or one chunk—that they would not be able to otherwise get if they weren’t working with Arctic Wolf.