Alert: Cyber-shark sighting

Robert Herjavec, star of ABC's Emmy Award-winning hit show Shark Tank also stars as CEO of a real life Canadian startup which became the world’s largest independent pure-play cybersecurity services company.

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Robert Herjavec, star of ABC's Emmy Award-winning hit show Shark Tank also stars as CEO of a Canadian startup who became the world’s largest independent pure-play cybersecurity services company. This isn’t a new TV show, it’s real-world and Herjavec has been playing the role since 2003. “Herjavec Group” is a break-out success and a much bigger audience is starting to watch.

If you’re a corporate CSO who hasn’t tuned in yet, here’s the story:

robert herjavec REUTERS/Danny Moloshok

Robert Herjavec, from the reality show "Shark Tank," arrives at the 42nd American Music Awards in Los Angeles, California November 23, 2014.

Toronto, a thriving metropolis with skyscrapers looking out at Lake Ontario, is North America’s third largest technology hub, with the most fiber optic cable of any North American city. Herjavec’s namesake firm - Herjavec Group, is headquartered there.

The firm plays in the global cybersecurity market, defined by market sizing estimates that range from $71 billion in 2014 to a whopping $155+ billion by 2019.

“When Blackstone moves into your neighborhood, you know it’s a good neighborhood” says Herjavec, referring to the cybersecurity industry. Blackstone Group, the world’s largest private equity firm has been making notable investments in to cybersecurity companies over the past couple of years.

Herjavec Group started out in 2003 with three people selling CheckPoint firewalls to Canadian corporations, then quietly built up over the years to become Canada’s largest information security services provider. Along the way they expanded into the U.S., and recently made a push into Europe. The firm has annual revenues of $150 million, and it has grown by 100% over the past year (from June 2014 to June 2015).

Private company cybersecurity exit valuation multiples have a median of about 5x revenues. Using that multiplier, Herjavec’s company would be worth $750 million - if it was selling. If you want to factor in the CEO’s star power and move the valuation multiple needle to the high end at 10x, then Herjavec Group would be worth $1.5 billion.

Before you start thinking merger or acquisition possibilities, Herjavec says he isn’t selling the company… now. But he is planning on selling a lot of cybersecurity to Global 2000 corporations over the next few years as part of an ambitious plan to double his company’s revenues, do more business in the U.S., and further expand internationally.

Can the business scale, and how much? That’s the main storyline. Scale is shark vernacular and VC napkin scratch for growing a company around a turnkey digital platform, or cookie-cutter business model. Herjavec Group is a ‘services’ business - the hardest type to scale because the need for more people grows along with revenues. But the firm does almost half its business as an MSSP (managed security services provider) - a productized outsourced security service offering - that can scale.

The plot thickens

Robert Herjavec is the underdog going head-to-head with Mark Cuban to become the #1 Tech Shark. Neither one of them has publicly said so. But if you watch Shark Tank, then you know the competitive drive these two have - and the jabs they throw at each other.

Cuban’s big score was the $5.7 billion sale of his internet company Broadcast.com to Yahoo! in 1999. Broadcast.com’s revenues were just $22.4 million when it was acquired.

Herjavec says he plans to double his firm’s revenue in the next few years. If he does, then a 10x multiplier on revenues at that time would put the value at $3 billion. Herjavec Group is already generating seven times the revenue that Cuban’s Broadcast.com did when it sold.

Cuban is the high-profile owner of the Dallas Mavericks which is worth $1.15 billion, according to Forbes’ January 2015 Report on NBA Team Valuations. The Mavs revenues at that time were reported at $168 million… not much more than Herjavec’s business.

When Herjavec Group entered the U.S. market last year, they coincidentally opened an office in Dallas. Or was that really a skybox for Cuban to watch the cyber action?

Another way to measure these Sharks is by their net worths. According to Forbes and other sources, Cuban has a net worth of around $3 billion. Herjavec has a net worth of around $200 million.

Both men are invested into other business ventures and industries. But this matchup is for bragging rights in tech.

If Herjavec can double his revenues as a pure-play cybersecurity company and expand globally, then the rare air of a 20x or higher multiple is possible - and he could be looking at a $6 billion valuation… a number that exceeds what Yahoo! paid for Cuban’s Broadcast.com.

Flashback

Herjavec Group moved from selling firewalls in its first few years to an expanded product portfolio when it acquired MetaComm in 2006, McAfee’s (now part of Intel’s Security business) largest partner in Canada and one its largest in North America.

By 2007, the firm’s revenues had climbed to $16 million - and in 2008 the company opened offices in Quebec City and Calgary.

In 2010 Herjavec Group acquired Cyberklix, a leading managed security services provider. On the heels of that acquisition, it announced a state-of-the-art, PCI-compliant, federally cleared SOC operating 24/7/365 and supported by certified technical experts. That SOC, and the firm’s ability to expand it and replicate it in other locations, became the cornerstone of its growth strategy.

Revenues soared to $120 million by 2012, and the firm had six offices throughout Canada.

In between the cyber acquisitions, Herjavec Group acquired a few IT services companies and dabbled in storage before locking down on cybersecurity as its sole focus. They cross-trained the technical people from those acquisitions into cybersecurity.

In 2014, the firm announced a three-year $250 million expansion plan, and it acquired Sentry Metrics, another MSSP out of Toronto. The firm also opened its first U.S. offices in New York and Dallas.

In February of 2015, Herjavec Group announced its acquisition of Reading, UK-based Sysec, pushing into the European market. Sysec has 50 professionals specializing in information, identity and infrastructure security, offering managed, consulting and professional services to more than 200 enterprise clients across the UK and Europe.

Leading man

Herjavec, 51, points out that Shark Tank only requires 17 days a year of filming… and even during breaks between watching entrepreneurs pitch the Sharks - he’s talking to his business staff and customers, and closing deals.

Herjavec says he was caught off guard by the time demands of his Dancing with the Stars appearance. The TV show has professional dancers pair with celebrities to train and compete in ballroom dancing. Herjavec says he never expected it would take 79 days of filming.

Despite celebrity status, Herjavec insists he is squarely focused on his cybersecurity firm, and being CEO is his full-time passion. He says there are staff in place to help with his Shark Tank investments so it doesn’t become a time drain.

Herjavec doesn’t view himself as a bloodthirsty money-hungry predatory shark, and he certainly doesn’t come off that way. He notes that CSOs need sharks like him who can help defend their corporations from cyber-attackers.

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