Kanata startup's strange trek to New York
It took 21 years, but Kanata software services company N-able finally achieved the ambition of its founders. N-able began trading on the New York Stock Exchange earlier this week at a price that gave it a market value of US$2 billion.
“It's the dream, isn't it, to build a company and take it public,” says Mike Cullen, the company's group vice-president, who joined N-able in its earliest years and stayed on for a remarkable journey.
Cullen watched N-able founder Mark Scott take a simple idea and turn it into a 130-employee firm in just six years. Scott created software tools for remotely running and securing information-technology networks owned by smaller businesses. N-able sold these tools to third parties known as managed-service providers.
When Scott left in 2006 to launch a second startup, Gavin Garbutt, an investor, took over as chief executive. The idea of looking after other companies' IT networks was popular, but convincing third parties to buy software tools made by a small Kanata firm was initially a grind.
“The first 13 years at N-able were really heavy lifting,” Cullen says.
Then came what has proved to be the defining transaction for N-able: It was acquired in 2013 by SolarWinds, a Texas-based outfit founded in 1999 by a former Walmart executive. SolarWinds was selling technology similar to N-able's, but geared to larger customers. SolarWinds decided to cover the waterfront by shelling out US$120 million in cash for N-able.
“SolarWinds at the time looked at everyone in the market,” Cullen notes. “They picked us.”
At the time, N-able was selling its software to 2,600 managed-service providers. This would grow by a factor of 10 under SolarWinds' stewardship. Not all of this was directly attributable to N-able. SolarWinds acquired competitors of N-able, including LogicNow of Scotland, and merged them in a separately run MSP business later renamed N-able.
In the summer of 2020, SolarWinds changed tack, announcing it would spin off N-able and list it on the NYSE. The rationale: Selling to large and small companies involves two very different approaches to marketing and technology. Keeping SolarWinds and N-able under the same roof meant reduced focus for both, the company's board of directors reasoned.
The net result of the spinoff, which became effective Tuesday, is a US$340-million entity (estimated 2021 revenues) with 1,300 employees. Kanata, with 254 employees, is the second-largest of N-able's many offices after Durham, in North Carolina's Research Triangle Park. It is also the home base for Cullen and Frank Colletti, the executive in charge of worldwide sales. Most of N-able's top executives, including chief executive John Pagliuca, work out of corporate headquarters in Boston.
That's often how it goes with successful tech startups. And Cullen, for one, isn't bothered by it. The initial public offering (IPO) “is a great example of what can happen if you build successful companies,” Cullen says. “This is great for the city (of Ottawa).”
The journey hasn't been without risks, as N-able learned to its shock last year, when SolarWinds was hit by one of the largest hacks ever recorded. In mid-December, the Texas firm revealed its core software platform, Orion, had been infected by malicious code dubbed Sunburst.
Since SolarWinds manages the networks of thousands of large enterprises and government departments — think Microsoft, Cisco and the U.S. Department of Homeland Security — the potential effects of the compromised data were wide-ranging.
In filings related to its IPO, N-able noted that the “threat actor” — believed to be a nation state — had had access to customer credentials for months before testing Sunburst late in 2019. “During this entire period, we were a part of the SolarWinds shared environment,” N-able's filing notes, “and the threat actor had persistent access to our systems and (Microsoft) Office 365 environment.”
N-able added by way of caution to investors that “the cyber incident has harmed, and is likely to continue to harm, our reputation.”
In a separate filing, SolarWinds said it had provided a patch for its Orion software platform and had taken “extensive efforts” to safeguard its customers' networks. The company noted it had also provided proprietary code for a “kill switch” it believes had disabled Sunburst.
The full impact of the Sunburst hack may not be known for some time, in part because investigations by SolarWinds and independent parties are ongoing. It's also the case that cyber attacks have become so common that their shock value is diminishing.
That may have been why N-able's IPO proceeded virtually without a hitch. The other explanation may have to do with momentum. SolarWinds first announced it was exploring a spinoff of N-able nearly a year ago. Had it waited until December 2020, when the Sunburst hack was revealed, Cullen and his N-able colleagues might still be waiting for that IPO.