The Nord Security Unicorn Journey
June 16, 2022
In April, Nord Security gained the status of the second tech unicorn in Lithuania with a fundraising of $100 million from investors at a valuation of $1.6 billion. So, in this interview, we talked to the team behind the project, Eglė Šimelionienė, and Laurynas Zabulis, about the process and its steps, attracting investors, pitching your business, and what needed to be accomplished to reach this goal. Take a look:
Can you share a little about the investment process and its phases?
E: The initial talks about the next steps for Nord Security started almost two years ago, but the process that was well-celebrated this spring began in May 2021. As all big projects have secret names, so did ours: we called it "Project Bucks".
So first, we had quite a few brainstorming sessions about the aim of this process, after which we came out with a few very simple outcomes.
We had to look for the know-how our organization did not have yet.
Then, we had to validate our business and show the world what we've created here in Lithuania, so we could finally mark this country as a land of two unicorns.
We also looked for like-minded business partners that would fit us culturally and help us achieve our goals.
Then, we hired top legal firms in the United Kingdom and Lithuania, and we did our homework to help this bootstrapped organization do its first fundraiser. We also had an investment bank that walked us through this process. With its help, we did a very detailed financial model, management presentation and filled in the documentation in the virtual data room.
Finally, we approached nearly 80 parties as targeted investors. And that's where the roadshow started:
We had hundreds of calls, meetings, and e-mails.
It took us 7 months to choose the three best parties that are the best match for our organization that signed the "Term Sheet" document.
And two more months to successfully complete the due diligence processes of technical, legal, and financial checks.
We concluded 600-page documentation and finally closed the round.
How did Nord choose the investors?
E: First, we have Tier 1 top leading funds from the United Kingdom "Novator", Germany "Burda", and the United States "General Catalyst". We chose them as the best matches to achieve our goals. They have a lot of experience and have helped many companies worldwide achieve astonishing results.
Then, we invited so-called friends and family members to be "angel investors". So now we have 15 people - founders of great companies such as "Wolt", "Supercell", "Net-a-Porter", "Checkout", and many others. We are very proud that they believed in us and now act as our ambassadors.
What are the key points that the company must keep in mind when presenting its business to VCs and angel investors?
L: Firstly, you need to put yourself into the shoes of an investor and consider what are the key selling points of your business. In our case, it was a technologically superior product, an innovative customer acquisition engine on the marketing front, and very attractive unit economics, in terms of growth, customer retention, and profitability. On top of that, think of how best to position your story to the investors so that they’ll believe in the offering.
Secondly, you must prepare many things in advance. So, in our case, we created a detailed financial model investor presentation and a comprehensive data room on the legal and financial fronts. We also anticipated many potential investors' questions and prepared an analysis in advance so that when the investors started their due diligence process, we had all the materials ready for them.
Thirdly, you need a dedicated team effort for this particular process. We had people at both Nord Security and Surfshark who were managing the project and set their time aside to prepare all the materials, do the analysis, and answer investors’ questions. And as Eglė mentioned, we also hired some excellent external financial and legal advisors.
Finally, you need to see it and set clear goals upfront of what you want to achieve in this fundraising process and what type of investor you want to target. For instance, we were targeting investors that invest in slightly later-stage and bigger companies and those who understand consumer businesses and the cybersecurity industry. Additionally, we wanted investors from different geographies, particularly Europe and the United States. And we acted on that. For example, we carved out time in our calendars to approach investors across different geographies to accommodate the various time zone differences. So, if we spoke to US investors via "Zoom", we usually had to do that in the late evening Lithuanian time to accommodate the 10-hour time difference between Silicon Valley and Lithuanian time zones.
In your opinion, what were the major selling points of Nord Security that attracted VCs and angels to invest?
L: So the selling points were both internal, specific to our business, and external, universal to the whole industry.
From the internal standpoints, we stood out in terms of how technologically advanced our products are, how diversified geographically the business is and how it diversified its product suite. Moreover, its attractive unit economics, particularly in growth, customer retention, and potential profitability, also had an impact. And the fact that our business has grown to this scale without attracting any external capital beforehand proves that we are executing our strategy well with our internal resources. Finally and most importantly, the investors were impressed by our team - that we're talented individuals working hard and hustling every day.
From the external standpoint, you know that the cybersecurity industry has very attractive fundamentals. And both Nord and Surfshark are well-positioned to continue growing and gaining market in both B2C and B2B sectors.
How do you think the unicorn title will affect the further Nord Security's success?
E: For me, the unicorn status is all about publicity. Now I think it's going to be even easier to hire talent all around the globe and knock on the enterprise - any enterprise - doors as a client. So, you know, this is just another public achievement that we have, and it's just about time to use it.
L: So, I think we'll have other means to grow the business organically and potentially by acquiring new companies. During this process, we also found some great partners. We have 3 fantastic investors and 15 business operators and company founders who we can ask for advice and consult on various matters. I think it will also help attract and retain talent, mainly by adding value to the stock options that employees could potentially get. And I think, in general, this is an excellent further step to the company's great success that's already been achieved and, I believe, the future is very bright.
E: So, stay tuned.