Israeli code security company Snyk has reported expected annual recurring revenue (ARR) of $300 million but prefers to wait with its IPO plans until at least 2026, the company’s CEO Peter McKay has told "TechCrunch." Earlier this year there were reports that Snyk had filed a confidential prospectus with the US Securities and Exchange Commission for a Wall Street IPO in 2025.
McKay told "TechCrunch," "We’ve got $435 million in the bank and are very close to break-even. In 2025, we won’t burn any cash, so I can pick the time when I go public. I don’t need to rush." He said that while market conditions were expected to improve in 2025, he favored 2026 in terms of the regulatory and economic environment.
ARR measures how much money a startup is expected to earn in a year from regular customers, and it is different from the way non-tech businesses, such as stores or restaurants, measure their revenue. While in regular businesses every purchase is new and uncertain, in startups that sell software on a subscription basis, customers pay regularly every month or year. For example, if a startup has 100 customers who pay NIS 100 per month each, monthly recurring revenue is NIS 10,000, so ARR would be NIS 120,000. Although this metric helps investors see the company's revenue potential, it has some significant drawbacks: it doesn't show the company's expenses, assumes that all customers will stay throughout the year (which isn't always the case), and doesn't reflect how much it cost the company to acquire those customers in the first place.
Snyk" A digital gatekeeper
Snyk was founded in 2015 by three graduates of the IDF 8200 intelligence unit – Guy Podjarny, Assaf Hefetz and Danny Grander. The company has developed a smart software tool that help developers write more secure code. The tool acts like a digital "gatekeeper" – it automatically checks the code, identifies security issues and software license issues, and proposes solutions for fixing them. The system is constantly improving – it learns from the experience of developers around the world and updates itself when new security issues are discovered. Snyk’s main advantage is that the system integrates seamlessly into the developers' workflow, so they can check and fix security issues without stopping their ongoing work.
The company has experienced significant growth in recent years. From a valuation of $1 billion in early 2020 to a peak of $8.5 billion in 2021. However, in 2022, "The Information" published a critical analysis that included a list of cybersecurity companies that it claimed were valued too high in relation to their revenue. Of the five companies listed, three were Israeli, including Snyk. The article focused on the companies' high revenue multiples, with Snyk valued at 85 times its annual revenue. By comparison, leading publicly-traded cybersecurity companies, like SentinelOne and CrowdStrike, traded at significantly lower multiples of only 30 to 34 times their revenue, at that period. In 2022, amid a slowdown in the global tech market, the company was forced to carry out two significant rounds of layoffs: the first in June, which included 30 employees, and the second in October, when 200 employees were laid off – 14% of the company's workforce.
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AI: Major source of growth
Snyk currently sees AI as a big opportunity for development and a significant source of growth. According to McKay, there is a clear reason for this: code written by AI contains 30%-40% more security problems, especially when new programmers use it, which increases the need for security systems like the one that Snyk offers. This strategy is already proving itself, he told "TechCrunch", about a third of the company's revenue today comes from solutions related to AI. Over the past two years Snyk has been working to expand its capabilities by acquiring other companies including two Israeli companies. In 2023, Snyk acquired Enzo Security, and Helios, which specializes in developing tools for developers and securing applications in the cloud.
Published by Globes, Israel business news – en.globes.co.il – on December 9, 2024
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