CrowdStrike IPO Seeks To Raise $100M, Reveals Strength Of Channel

CrowdStrike said its ability to achieve future revenue growth depends in part on training channel partners to independently sell and deploy its flagship Falcon platform, according to its latest SEC filing.

CrowdStrike filed to raise up to $100 million in an initial public offering (IPO) and disclosed that a "vast majority" of its Falcon platform sales flow through channel partners.

The Sunnyvale, Calif.-based endpoint security vendor said it has a 'channel-centric' go-to-market approach, leveraging its network of channel partners to maximize effectiveness and scale for its platform and cloud module sales. CrowdStrike's top channel partner accounted for 15 percent of the company's total revenue and 9 percent of net accounts receivable in the fiscal year ended Jan. 31, 2019.

"Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our channel partners and in training our channel partners to independently sell and deploy our Falcon platform," CrowdStrike said in its 194-page regulatory filing Tuesday with the U.S. Securities and Exchange Commission.

[Related: CrowdStrike Eyes IPO In First Half Of 2019: Report]

CrowdStrike didn't immediately respond to a request for comment on its S-1 filing. Reuters reported in October 2018 that the company had hired Goldman Sachs to prepare for an IPO that could come in the first half of 2019.

The company was founded in 2011, and has raised $481 million in six rounds of outside funding, according to CrunchBase. The company employed 1,455 people as of Jan. 31, up from a headcount of 910 just a year earlier.

The company said in its S-1 filing that it plans to use the net proceeds of its IPO for general corporate purposes, including working capital, sales and marketing activities, research and development, general and administrative matters, and capital expenditures. CrowdStrike will be listed on the Nasdaq stock exchange under the ticker symbol CRWD.

CrowdStrike said its direct sales team works with its channel partners on account penetration, account coordination, sales and overall market development. The company and its channel partners historically sold primarily to large organizations, CrowdStrike said, but have increasingly focused on capturing market share in the SMB sector.

The company credits its 2018 embrace of a trial-to-pay model - which provides free trial access to Falcon Prevent directly from the CrowdStrike website or the AWS Marketplace - for fueling growth in the SMB.

CrowdStrike had 2,516 subscription customers worldwide as of January, including 44 of the Fortune 100, 37 of the top 100 global companies, and nine of the top 20 major banks. That's 103 percent higher than the company's January 2018 subscription customer base of 1,274 customers.

Channel partners of CrowdStrike negotiate pricing with the end customer and, in some rare instances, are responsible for certain support levels directly with the end customer, according to the company. CrowdStrike also uses referral partners, and in those instances, the company negotiates pricing and contracts directly with the end customer.

"Our sales team also leverages our network of channel partners," CrowdStrike wrote. "Additionally, we engage in joint marketing activities with our channel and technology alliance partners."

CrowdStrike has experienced massive growth in recent years, according to its regulatory filing, with sales jumping to $249.8 million in its most recent fiscal year, which ended Jan. 31, up 110.2 percent from $118.8 million in fiscal 2018 and 373.3 percent from $52.7 million in fiscal 2017.

The company's net losses dipped to $140.1 million in fiscal 2019, some 0.9 percent better than its net loss of $141.3 million the year prior. CrowdStrike expects its operating expenses to increase going forward as the company continues to invest for future growth, and the company said it cannot predict when or whether it will reach or maintain profitability.

CrowdStrike co-founder, president and CEO George Kurtz owns 10.5 percent of CrowdStrike before the IPO, according to the S-1 filing. Institutional investors hold a nearly 62 percent stake in the company, with entities affiliated with Warburg Pincus owning 30.3 percent, entities affiliated with Accel owning 20.3 percent, and entities affiliated with CapitalG owning 11.2 percent.

Warburg Pincus is CrowdStrike's original investor (Kurtz was an entrepreneur-in-residence there prior to forming CrowdStrike), while CapitalG led the company's $100 million Series C round in July 2015. Accel, meanwhile, was a lead investor in the company's $26 million Series A round, $30 million Series B round, $100 million Series D round, and $200 million Series E round, according to CrunchBase.

CrowdStrike's IPO filing comes just a year after top next-generation endpoint security competitor Carbon Black hauled in $152 million in a Nasdaq public offering. Another top CrowdStrike competitor, Cylance, was sold to BlackBerry for $1.4 billion in November 2018.