KnowBe4 plans to be more aggressive on the M&A front after announcing its first acquisition under Vista Equity this week,  said founder and CEO Stuart Sjouwerman.

“We have a stated goal to get to USD 1 bn in ARR (annual recurring revenue) within the next couple of years,” Sjouwerman said. “Other [(acquisitions]) after this are highly likely.”

After spending the first year under Vista ownership internally reorganizing its processes, KnowBe4 is in “a much better position to expand now,” Sjouwerman said. The security awareness training company was taken private by Vista Equity in February 2023 for USD 4.6bn, as reported.

As part of its newly honed revenue management strategy, instead of pursuing total contract value, it is adopting a modern software as a service (SaaS)-based approach focused on ARR. “Everything is ARR-based including commissions because the company’s valuation is based on ARR and EBITDA,” Sjouwerman said.

Acquisitions can also help KnowBe4 meet its goal to expand internationally. It started out as mainly US- focused but wants to get to 40% international revenue, the CEO said.

On 24 April, Clearwater, Florida-based KnowBe4 acquired Egress, a UK-based leader in adaptive and integrated cloud email security. “Egress is a great example,” Sjouwerman said. “They are in the UK. We will help them expand in the US.”

Other acquisitions are also likely to be in Europe. “Europe is probably No. 1 for targets,” he said. Targets can have USD 25m ARR or “ideally more,” he said.

KnowBe4 is also interested in entering adjacent segments globally, since, as Sjouwerman said, “Cybersecurity has dozens of categories.”  It is also seeking other security tools to sell to information security officers and local providers of security awareness training in different markets.

Large enterprises make up 50% of KnowBe4’s revenue but only 10% of its customers. The business has been adding more than 1,000 customers per month, Sjouwerman said.

KnowBe4 is larger than all its competitors combined in total revenue. “No one is even close to us,” Sjouwerman said.

KnowBe4 did not disclose terms of the Egress deal, but Sjouwerman said it adds just over 300 employees, bringing KnowBe4’s total headcount to more than 2,000.

The deal resulted from a year-long co-marketing partnership between the two companies. Egress’s CEO, Tony Pepper, “was aware of what we were doing in security awareness and phfishing [(simulations]),” Sjouwerman said. “They built their product almost from the ground up to integrate with our platform.”

Now, KnowBe4 will be able to offer its customers an integrated cloud email security (ICES) product, he said.

“We didn’t have an ICES product,” Sjouwerman said.  “Our competitive position is much better versus (other) vendors with both email security and training,” Sjouwerman said.

Sjouwerman would not disclose current revenue but in 2022, before the Vista sale, KnowBe4 had close to USD 400m in revenue and it has grown significantly since then, he said.

Recent acquisitions in the ICES space include Thoma Bravo-backed Proofpoint’s acquisition of Tessian.

Sjouwerman said the company’s next step will be decided in conjunction with Vista. An exit could take the form of an IPO or sale to private equity or a strategic, he said.

KnowBe4 has no direct comp when it comes to other listed companies. Sjouwerman said he has no preference between an IPO versus a sale. “I’ve done all of it. It’s just the next level of the game.”

Egress is backed by FTV Capital and AlbionVC. Citi served as exclusive financial advisor and Orrick, Herrington & Sutcliffe LLP served as legal counsel to Egress.