Cybersecurity tech startup Arctic Wolf raises $401 million in debt as it eyes IPO

With the ongoing global economic downturn, tech startups continue to struggle to secure new funding as the glut of cheap money dries due to high-interest rates causing investors to pull back from risky bets. In the latest sign that pure equity financing is becoming increasingly harder to come by, cybersecurity startup Arctic Wolf decided to opt for all-debt financing in its latest round of funding.

Today, Arctic Wolf it has raised $401 million in convertible notes led by existing investor Owl Rock, with participation from Viking Global Investors, the Ontario Teachers’ Pension Plan, and Neuberger Berman  It is another example of late-stage startups opting for alternative financing to bridge the longer-than-expected gap between funding rounds and an initial public offering (IPO).

The announcement comes just three months after the unicorn startup raised $150 million in July that tripled its previous valuation ($4.3 billion). Arctic Wolf CEO Nick Schneider told media outlet Reuters that the new cash infusion will help the company to bolster its balance sheet and fund potential acquisitions.

“We evaluated a number of different options, including traditional equity raise, but [debt] was the best for Arctic Wolf, for our stage of hyper-growth,” Schneider said via email. “In a turbulent economic environment, security will remain a top priority for companies. Being able to secure this amount of funding from both new and existing investors is a testament to what our team continues to accomplish and reflects the fact that Arctic Wolf continues to be perceived to be among the top-performing private software-as-a-service companies by the investment community.”

Arctic Wolf has been working with banks to prepare for its IPO since the beginning of this year. However, rising interest rates and volatile market conditions, have caused the startup and many other tech companies to push their IPOs to future dates.

“The markets just aren’t in a great spot for IPOs, and that’s why in part we wanted to make sure that we looked at our other options,” said Schneider.

Founded in 2012 by Brian NeSmith and Kim Tremblay, the Minneapolis-based Arctic Wolf offers a security operations center as a concierge service that helps companies end cyber risk. Its solutions also include Managed Detection and Response, Managed Risk, and Managed Cloud Monitoring, each delivered through the industry’s original concierge security team.