Vendor Cuts Valuation by $800M to Get Funding From Generation Investment Management
OneTrust hauled in $150 million a year after laying off 950 employees but had to slash its valuation by $800 million to seal the deal.
The Atlanta-based company intends to use the proceeds to accelerate its growth and fulfill customer demand for trust intelligence software. The latest round was led by Al Gore’s Generation Investment Management and valued OneTrust at $4.5 billion. That’s down more than 15% from April 2021, when OneTrust completed a $210 million Series C extension at a $5.3 billion valuation (see: OneTrust CEO on Regulatory, Automation Issues and Privacy).
“In the face of changing regulations and new business initiatives like AI, organizations need the technology to drive trust to the center of their operations and manage the complex web of privacy, security, ethics and ESG requirements,” Chairman and CEO Kabir Barday said in a statement. “This funding is a testament to our sustained growth, market leadership and customer-centric innovation.”
OneTrust is the second cybersecurity vendor to publicly reduce its valuation in exchange for additional cash, coming seven months after Boston-based application security vendor Snyk cut its valuation by $1.1 billion to land $196.5 million in funding. Late-stage cybersecurity firms Arctic Wolf and Netskope went a different route in October and January, respectively, when each took on more than $400 million of debt.
Taking a Valuation Hit
Those providers avoided receiving a new valuation since the short-term debt issued will convert to stock shares at a premium of Arctic Wolf or Netskope’s eventual IPO price. Given the economic downturn has made going public unpalatable with stocks falling and investors placing a premium on profitability, other security firms will likely follow Snyk and OneTrust’s lead and accept new equity on less favorable terms.
“This funding is a testament to our sustained growth.”
– Kabir Barday, Chairman and CEO, OneTrust
OneTrust shifted its strategy in the early days of the economic downturn, laying off 950 workers, or 25% of its staff, in June 2022 to strike a balance between growth and profitability. That is the largest round of layoffs of any cybersecurity company since March 2020. Then in November, OneTrust closed Planetly and laid off all 200 of its employees just a year after buying the carbon management software company (see: OneTrust Lays Off 950 Due To ‘Capital Markets Sentiment’).
Despite the staff cuts, OneTrust’s technology remains well-regarded by customers and analysts alike. The company has been the market share leader in the data privacy compliance software space for each of the past four years, according to IDC. OneTrust’s sales represented 40.2% of the $1.1 billion market in 2020, IDC found, with Collibra and TrustArc coming in second and third with just 11% and 7.4% share.
“The data privacy compliance market continues to experience significant growth amidst increased regulatory activity,” IDC Privacy and Legal Technology Research Director Ryan O’Leary said in a statement. “OneTrust continues to lead the market forward and capitalize on this emerging market. We are still in the early stages of this market, but it is poised for longevity.”
Al Gore Enters The Cyber Arena
OneTrust was IDC’s top-rated vendor in its April 2021 overview of the global data privacy management software market as well as the top-rated vendor in Forrester’s assessment of the privacy management software market in late 2021. The company also led Forrester’s evaluation of the privacy management software market in early 2020, with both TrustArc and Securiti trailing OneTrust in the leaders category.
“With OneTrust’s software, companies can protect sensitive data and manage the increasing volume and complexity of regulatory issues,” Generation Investment Management Partner Joy Tuffield said in a statement. “This investment demonstrates our confidence in the company’s vision, leadership and ability to execute.”
This is the first big investment Generation Investment Management has ever made in the cybersecurity space. The firm was co-founded in 2004 by Gore, who served as U.S. vice president from 1993 to 2001, and Goldman Sachs Asset Management Head David Blood, and Gore continues to serve as chairman. Other investments from the firm include Asana, Proterra, Remitly, Seventh Generation and Toast (see: OneTrust’s Blake Brannon on Unifying Privacy and Governance).
“This significant investment is a testament to both the resilience, hard work and expertise of our team as well as our customer and partner confidence and trust,” OneTrust Chief Product and Chief Strategy Blake Brannon wrote on LinkedIn. “We are all on this mission together and this affirms that our journey is not only on the right path but is also inspiring others to join us.”