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Darktrace IPO

Darktrace is a cutting-edge start-up that has used artificial intelligence and machine learning to stay one step ahead of cybercrime. How has it arrived on the LSE’s Main Market?

Corporate Financier imageTackling ever-growing threats

There’s money to be made out of fear and, while in no way wishing to crank up the panic, Darktrace claims that it detects one cyber threat every second – more than 30 million a year.

In April 2021, Darktrace listed on the Main Market of the London Stock Exchange, raising £165m. This will be invested in its R&D centre in Cambridge to evolve its product offering for customers and “explore parallel applications for its AI technology in adjacent fields”. The company also wants to grow its presence in existing markets and expand its geographical reach.

The IPO, advised by Jefferies (with Grant Thornton as reporting accountants), valued the business at £1.7bn and it has been admitted to the Premium Listing Segment. But the process wasn’t without its problems. Darktrace’s ties to one of its major shareholders, Autonomy founder Mike Lynch, were problematic, to say the least. The $11.7bn sale of the Cambridge-based software business to HP in 2011 is still the subject of substantial ongoing litigation.

Females first

The two executive positions at the top of Darktrace are held by women: co-founder, CEO (and Brit) Poppy Gustafsson; and American Cathy Graham, who crossed the Atlantic just before lockdown last year to take on the role of CFO.

Gustafsson trained as an ACA at Deloitte in Cambridge, where her focus was on tech. From there, she joined Amadeus Capital and then Autonomy. She left in 2011, when it was sold to HP.

In 2013, she co-founded Darktrace with Dave Palmer, Emily Orton, Jack Stockdale and Nicole Eagan, and took on the role of CFO. In April 2016, she became COO, and then, six months later, CEO.

Under Gustafsson’s leadership, the company achieved unicorn status in 2018, and it now has 4,700 customers and 1,500 employees worldwide. A year later, she was awarded an OBE for services to cyber security.

Her best leadership advice? “Work out, at any given time, which projects across your business are going to move the needle for your plan. Push those projects hard and perhaps think about parking others.”

Real innovation

Darktrace was founded in 2013 by cyber experts and mathematicians in Cambridge. It is most definitely a pioneer in software engineering and a genuine world leader in providing AI to businesses and in cyber security. It created autonomous response technology on its platform, which uses machine learning and AI algorithms to detect and respond to cyber threats in a diverse range of situations, including the cloud and networks, the internet of things (IoT) and industrial control systems.

“The stereotypical hooded hacker in their bedroom certainly still exists, but cybercrime has become a big business as virtually every organisation runs on software and internet connectivity,” says CEO Gustafsson.

Heavyweight backers

A key element of Darktrace’s success has been the backing of a group of influential investors, including Invoke Capital and Autonomy founder Mike Lynch.

In 2016, Darktrace closed a $65m round of funding led by Wall Street private equity giant KKR, with TenEleven Ventures and SoftBank’s SB ISAT. In 2017, another $75m was raised – KKR and TenEleven were joined this time by Summit Partners and Insight Partners. In 2018, $50m was raised and British investment firm Vitruvian Partners joined the funding round.