Hack the Bank: how cybersecurity startup Hack the Box raised £45m in a recession

Fresh from a successful Series B, cybersecurity expert and cofounder of Hack the Box, Haris Pylarinos tells us his top hacks for fundraising during a downturn.

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Helena Young
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Raising a huge lump of investment capital is every entrepreneur’s dream. We’ve all fantasised about Deborah Meaden handing over a suitcase of cash on Dragon’s Den (even if it is fake money).

Of course, sourcing a large-scale cash injection is not as simple as designing an attractive enough flip board. It takes hard work, determination, and years of planning to achieve – particularly in the current climate.

Over the past year, investor wallets have tightened, rattled by recession fears. What was already a difficult hill to climb has developed into a mountainous trek through the Andes.

But improbable does not equal impossible. Business owners who are feeling dubious about accessing investment this year should look to those who have already planted their flag at the summit. Like Haris Pylarinos, cofounder of Startups 100 bronze medallist, Hack the Box.

The cybersecurity training provider is celebrating this month after securing a huge $55m (£45m) Series B. We caught up with Pylarinos to get the lowdown on how the team achieved this feat, and his advice for startups on how to fundraise in a bad economy.

What is Hack the Box?

Given how prevalent the topic is, most SMEs would probably consider themselves clued into the cybersecurity basics. We know it’s a smart idea to regularly change our passwords and be aware of phishing emails.

But sophisticated cyber threats are emerging at such a rapid rate that even the IT professionals are struggling to keep up. New technologies like cryptocurrencies have made it easier to launch ransomware attacks.

Resultantly, SMEs have been left increasingly vulnerable to attacks. Data from Check Point Software shows the number of UK cyber attacks shot up by 77% between 2021 and 2022.

Hack the Box CEO Haris Pylarinos knows this only too well. He launched the company after being “disappointed with the way training was being offered to businesses and consumers.”

Pylarinos began exploring ways to get up to speed on the topic way back in 2017 – that’s equal to around five decades in internet years.

The ex-systems engineer discovered that, at the time, the only available route to study up on cybersecurity was by reading. As he saw it, this was no comparison to learning in the actual field.

Taking a ‘white hat’ approach (internet-code for an ethical hacker) Pylarinos built the first iteration of Hack the Box, a gamified hacking platform that lets users level up their cybersecurity skills and defend against simulated security issues.

“It took me two and a half months to code it, and then I published it,” Pylarinos shrugs. We aren’t quick enough to hide our awe.

Don’t spend it all at once

As origin stories go, Pylarinos’ ticks all the Silicon Valley checkboxes. Like Steve Jobs sitting in his parents’ garage, Hack the Box began as a simple invention that has since ballooned into a million-dollar cyber empire.

But hundreds of others have tried to emulate this approach. How has the Hack the Box team managed it? And more importantly, how have they managed it now, in the shadow of COVID-19 and the face of an impending recession?

If there was one word to describe Hack the Box’s operational strategy, it would be cautious.

Even after our first two financing rounds, we didn't spend any of the capital.

Pylarinos attributes this to the company’s humble, bootstrapped beginnings. Despite having now successfully completed three funding rounds (raising a total of $70m) starting out with just a small amount of savings has meant the founders have prioritised profitability since the firm first began operating three years ago.

“We’ve always been very cost-efficient,” he reveals. “Even after our first two financing rounds, we didn’t spend any of the capital. In the current market, this gives you more points than it used to.”

The last profitable tech company

After a string of high-profile startup failures like Pakistan’s top startup Airlift last year, which previously boasted a huge valuation of $270m, it only holds that investors will recoup their losses by prioritising ‘money in the bank’ over expansion. Pylarinos concurs with this theory.

“[This year] was much harder than previous fundraisers that we did in the past,” he admits. “But there was interest because we were never this traditional startup that burns massive amounts of capital or relies on the next fundraiser to endure.”

So, when crafting a business plan, think cautiously before you emphasise growth over survival. For those of us who are used to reading about tech startups like Uber – which, despite being worth over $50bn, didn’t turn a profit until 2021 – that might be a foreign idea.

“Only a few years back, if you were a company that was not spending capital, that translated as [proof] you are not growing fast enough,” acknowledges Pylarinos. “Yet, we were growing fast enough, and spending less capital.

“With the current market conditions, I think we’re in a perfect spot. The risk of going bust in such conditions where capital is not granted, is much larger.”

Hack the Box team photo

That theory has been proved this week with a string of high-profile tech layoffs including Spotify. The Swedish music-streaming giant announced it would cut 6% of its 10,000 employees on Monday. The company has never turned a full-year net profit.

It sounds like the company could learn a thing or two from Hack the Box. Writing on the company’s blog, Spotify CEO Daniel Ek said, “in hindsight, I was too ambitious in investing ahead of our revenue growth.”

Hack the Market

Despite its conservative behaviour, the team hasn’t stayed still. Since Pylarinos first coded the platform in 2017, Hack the Box has grown into a 180-person team. So how has it got so big, if it hasn’t followed in companies like Airbnb’s footsteps to reinvest millions into scale-up?

Simply put: it’s an excellent product that’s stayed ahead of rivals. The startup’s unique offering has attracted an ever-increasing army of cybersecurity experts to share techniques and methodologies for combating the latest cyber threats

“The only promo or marketing however you want to call it that I did was that I posted a link to a Facebook group so people would start seeing it,” says Pylarinos. “It had a much, much better reaction than I was expecting.”

We’ll say. Currently, the Hack the Box global following now stands at 1.7 million – a level of organic growth that would give Mark Zuckerberg cause for envy.

Patience makes the fund grow bigger

One of the biggest factors that can affect funding success (particularly in a period of economic slowdown) is timing. It might make more sense to wait until the market outlook looks more favourable, and look to other funding sources like small business grants. 

But will putting the brakes on your business strategy affect success?

It didn’t for Hack the Box. Pylarinos describes “several attempts to raise capital in early 2022, when the market was declining like crazy.”

In the current market conditions, being cautious gives you more points than it used to.

As stocks fell, overall valuations decreased and investor competition slowed. The team decided to hold off on funding – a difficult decision that turned out to be the right one.

“We stopped pursuing it, because we saw that it made no sense,” says Pylarinos. “We had to let the market stabilise before we tried to actually raise capital.”

Pylarinos does acknowledge that Hack the Box was in a slightly better position than most at the time due to an ongoing sector boom, assessing that “the good thing about cybersecurity is that it is very resilient. While we are in a declining market, and dealing with global budget cuts, the threats overall in cybersecurity keep rising. It’s evening out the equation, definitely.”

Patience is a virtue. Buoyed by its latest funding round, Hack the Box has now unveiled a bold blueprint for the years ahead – which include tripling the team in three years.

Targeting a diversified portfolio of service offerings, Pylarinos says he envisions becoming fully embedded into client operations to help assess, onboard, and upskill cybersecurity professionals.

“Generally startups [need to] start taking into account cybersecurity very early along the process,” he advises. “Because if you start from day one, [cybersecurity] is much easier. The longer you leave it, the harder it will be to implement.”

The importance of perseverance

Clearly, Hack the Box is a company that’s focussed on looking ahead. But for those who dream of such an achievement, we ask Pylarinos to revel in his successes for a moment. How does it feel to raise £45m for the business you began in your bedroom?

“I feel very proud,” Pylarinos smiles. “Relieved, also, because it was a super stressful year, and we were not helped by the market conditions.”

My number one piece of advice for entrepreneurs looking to raise finance would be, don't settle.

Today’s new and emerging business owners can take comfort in Hack the Box’s success story. It is proof that – with a pragmatic, patient, and persistent approach to fundraising – an economic slowdown doesn’t have to mean pressing pause on your ambitions.

“At Hack the Box, we teach a fighting mindset,” Pylarinos says seriously. “My number one piece of advice for entrepreneurs looking to raise finance would be, don’t settle. Persevere on the target and you will achieve it. But don’t settle.”

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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