Eden Prairie-based cybersecurity company Arctic Wolf just celebrated its 10th anniversary. The company was founded in April 2012, and its approach to cybersecurity has proved to be a winning formula.
I recently had the opportunity to interview Arctic Wolf’s Chief Marketing Officer Dan Larson, who told me the story of the company’s past, present and plans for the future.
Cybercrime is a global criminal enterprise
Larson said that cybercrime became bigger than the global drug trade during the last 20 years.
In 2009 Google was hacked by China in an undertaking known as Operation Aurora. That was the wake-up call to everyone else; nobody is safe if one of the world’s premier technology companies can get hacked.
In that time frame, it became clear that cyber threats were coming from multiple sources. On one end were the large, well-organized threats that often had government-sponsored support, like Operation Aurora. On the other were the more garden-variety thieves now using computers instead of more traditional tools of the criminal trade.
Currently, two of the most common criminal attacks are ransomware and “business email compromise.”
Ransomware is a type of attack where a cybercriminal will hack your system, encrypt all your data and then contact you and demand you pay a ransom (i.e., extortion money) or you cannot access your information.
A business email compromise campaign is another attack where small businesses are increasingly becoming victims.
In a business email compromise, a criminal obtains passwords somehow; often, they are purchased on the dark web. The criminal will silently observe your inbox to figure out your routines. Then, when it comes time to pay the bills, they will impersonate your payees and get you to pay the criminal instead. This can be done in many ways, such as contacting you and saying the customer has a new bank account, so please pay this new account number.
Arctic Wolf takes a new approach to cybersecurity
According to Larson, the company was founded on the idea that most organizations cannot afford to provide themselves with adequate protection against cyber threats. There are thousands of cybersecurity products and services.
“What most companies really need is a full blown 24-by-7 security operations center,” he said. “But setting up one of these on your own takes 20 people, millions of dollars, and without it you are basically bringing a knife to a gunfight against modern cybersecurity attackers.”
Larson said only large organizations were the targets of cyber attackers until about 20 years ago. But in the last two decades, cybercrime has become a profitable criminal enterprise. Unfortunately for the rest of us, this attracted new criminal talent, and everyone became a potential target.
Arctic Wolf was founded on the idea of building and then scaling the best data security center in the world to make it affordable to smaller organizations, thus providing quality cybersecurity services available to many.
In that way, it could be the rising cybersecurity tide that lifts all ships.
Arctic Wolf serves many organizations, from small businesses to multinational corporations.
It is a subscription-based business model with a minimum annual contract size of $20,000 per year up to multi-million dollar contracts with multinational corporations. The company’s core product is managed detection and response. It has added new services like vulnerability management and security awareness training.
Recently Arctic Wolf acquired TEHTRIS, a Madison, Wisconsin, company that expands its ability to help companies recover from a cyberattack.
Headquarters move to Eden Prairie
Arctic Wolf moved its headquarters from Silicon Valley to Eden Prairie (at 8939 Columbine Road) in 2020 for many reasons.
There is a long tradition of engineering-based technology companies in Minnesota. This is known to many as the “Silicon Prairie” story.
According to Larson, the company leadership team has strong Minnesota ties and believed they could run a world-class technology-based cybersecurity company here. Arctic CEO Nick Schneider and several management team members worked for a couple of very successful Minnesota technology companies, Compellent and Code 42 Software.
Larson grew up in Avon, Minnesota, and attended the University of Wisconsin at Madison. There is a substantial pool of technical talent available here in Minnesota. Larson was quick to point out that the decision did not have much to do with saving costs. It is a little more affordable to do business here as opposed to Silicon Valley, but the market of human technology capital is a global one. Not only was the available talent here in Minnesota, but Minnesota has the best talent available.
In the last 12 months, Arctic Wolf’s employee count has gone from 900 to 2,000. Currently, the company has 500 employees in Eden Prairie and plans to hire at least 100 additional employees in Eden Prairie in the next 12 months.
The company is flexible regarding remote employees and believes there is value in remote and in-office work. Arctic Wolf has hired a number of ex-military people and sees that as a good recruitment source. Arctic Wolf is also nurturing a number of university partnerships.
A well-capitalized operation
Arctic Wolf is still privately held and has successfully raised investment capital. In July 2021, the company raised $150 million in series F funding. At that time, the company was valued at $4.3 billion. Owl Rock and Viking Global Investors assisted them in this financing round.
The company raised $401 million in convertible debt in October. Convertible debt is an investment vehicle where a company raises money with the option of later paying it back as a loan or converting it to equity.
Usually, this is an investment vehicle that is only available to publicly held companies. The fact that Arctic Wolf was able to raise money this way as a privately held company indicates that the capital markets have a good deal of confidence in their chance of success. Owl Rock, Viking Global Investors and the Ontario Teacher’s Pension Plan assisted them in this financing round.
Larson said the latest $401 million capital infusion will likely be used to make targeted acquisitions to enhance its available service and product offerings.
Arctic Wolf’s long-term growth has been dramatic and sustained.
Currently, the company serves over 3,000 customers. In the last 12 months, Arctic Wolf has expanded into new global markets, including South Africa, Benelux, and the Nordic countries, as well as an upcoming launch into the Asia Pacific region.
Larson was understandably coy when asked about Arctic Wolf’s future plans. What does seem clear is the cybersecurity business will continue to grow, and its prospects are bright. Arctic Wolf provides well-paid jobs to highly educated employees and is a valuable service to the U.S. and the world economy.
That is a win for Eden Prairie.
Editor’s note: EPLN contributor Frank Farrell is a longtime Eden Prairie resident and an attorney with 43 years of experience. He was recently appointed to the EPLN board of directors.
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