Malwarebytes, Once A Teen Vision, Raises $50M for Security Software

When Marcin Kleczynski was 12, he downloaded a pirated video game into his family’s shared computer, infecting it with malware. That would have landed most kids in big trouble. But in Kleczynski’s case, the mistake led to much different consequences.

Now 26, Kleczynski heads the profitable company Malwarebytes, which announced Thursday it raised $50 million from global investment firm Fidelity Management and Research Company. That Series B round brings the Santa Clara, CA-based cybersecurity company’s total fundraising to $80 million since 2008, when Kleczynski, still a teenager, founded the software startup with three partners.

Malwarebytes arose from a pledge Kleczynski says he made as a twelve-year-old after he learned how hard it was to purge the malware from his family’s computer.

“I will spend the rest of my life helping people deal with this,” the young CEO remembers vowing to himself.

Knowing little about programming at the time, Kleczynski (pictured above) Googled around and found an online security forum where people were trading tips about combating malware—a rising problem at the time. A forum member showed him a method to clean his computer. It involved some 40 or 50 steps and took Kleczynski three days. “This is crazy,” he recalls thinking. He started to learn about programming.

Fast forward to 2008: Kleczynski and his small team put out an anti-malware app focused on consumers, which he says brought in half a million dollars by the end of that year. Malwarebytes offered to clean computers of existing malware at no charge, and then sold customers an anti-malware software shield for $25 a year.

That generated a lot of cash, even though fewer than one percent of those consumers buy the product, Kleczynski says. But the real benefit comes from the business leads they provide. A dental office worker might tell her boss about Malwarebytes, for example. By 2011, when Kleczynski was a computer science student at the University of Illinois, Malwarebytes was gaining some traction with small and medium-sized businesses.

In mid-2014, Malwarebytes raised a $30 million Series A funding round led by Highland Capital Partners. Kleczynski says the startup had positive cash flow and didn’t need the money, but the young founders wanted help from professional managers. At the time, Malwarebytes didn’t have a chief financial officer.

The company plans to use its new cash infusion from Fidelity to continue building its business customer base, which now includes large enterprises.

In 2015, Malwarebytes introduced a suite of products tailored for businesses, including a version of its anti-malware software, which protects computers and devices. Its Anti-Exploit for Business is a shield against cyberattacks that take advantage of vulnerabilities among browsers and applications. To get both products, companies can sign up for Malwarebytes Endpoint Security. The full service costs about $50 per computer, but rates vary because Malwarebytes offers volume discounts and multi-year contracts, Kleczynski says.

The business products have raised the company’s billing run-rate to over $100 million and boosted revenue by more than 100 percent, according to Malwarebytes CFO Mark Harris. The company became profitable last year, Kleczynski says.

Two years ago, 75 percent of Malwarebytes’ revenue came from consumers. Now, it serves 70,000 businesses, which provide about half its revenue, Kleczynski says. Malwarebytes signed more than 400 deals over $10,000 in 2015. Since May, it has landed six deals over $100,000, he says.

Malwarebytes is used as an alternative or adjunct to anti-virus software, and is compatible with other types of cybersecurity protection that businesses routinely buy to cover all lines of defense, Kleczynski says. “No solution detects everything,” he says.

Kleczynski says he wants to focus on healthy company growth for the next five years. The plan could include acquisitions or an IPO. Malwarebytes will keep eyes trained on what customers want, and add more engineers to its staff of 350, he says. Currently, two-thirds of Malwarebytes’ employees are engineers.

“I love it that way,” Kleczynski says.

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