Don’t ask Tanium CEO Orion Hindawi to apologize for the hard-edged internal company culture or his family’s iron grip on the business, all of which have generated a slew of negative headlines recently.
“Great things are not cuddly,” Hindawi told Business Insider in an interview this week.
Tanium’s business of providing cyber-security services is a very “demanding, stressful thing,” he said. And he refuses to pamper employees with the over-the-top perks that some of his Silicon Valley peers do.
But those who don’t like the way Orion Hindawi, and his father David Hindawi, who is the Tanium cofounder and Executive Chairman, run the business, will now have a way to get out.
Tanium announced on Thursday that it will allow employees to cash out of $50 million worth of their stock to a suite of investors. The deal is part of a $100 million fund raising round. Tanium will use the money to buy employee shares. David Hindawi will also be cashing out $50 million dollars worth of stock in the deal, selling to the same group of investors.
Business Insider caught up with Tanium cofounder CEO Orion Hindawi to discuss the deal, as well as the scathing exposé by Bloomberg that characterized the security startup as a stressful place to work, and Hindawi as a brutish leader.
Hindawi talked openly with us about the culture of his company, the stock sale, the iron-clad hold over ownership he and his father have on the company, and the controversial accusations over why he was firing people.
Tanium is the second startup founded by this father-and-son team. The father-and-son team had worked for about 18 years at the previous company David Hindawi founded, BigFix, which sold to IBM in 2010 for a reported $400 million.
While the deal is good for employees, investors are buying existing common stock, not preferred, so it does not change the founders’ ironclad grip on the company, Hindawi tells us.
“We want to let employees buy the houses, cars or whatever they’ve been dreaming about and not feel quite as much pressure on the IPO as we otherwise might,” he said, adding that he still fully intends to take the company public at some point.
Tanium has allowed employees to cash out of their stock in secondary sales before. They were, for instance, able to sell shares in March, 2015, as part of an overall $64 million investment into the firm that did include the company selling equity to investors, the company tells us.
This round values the company at $3.75 billion. That’s a slight increase from 2015, which was the last time the company offered a new stake to investors. Then, Tanium was valued at $3.71 billion, according to PitchBook, a database that tracks such info. It is one of most highly-valued security startups in the industry.
Tanium has raised about $287 million total. A-list VC Andreessen Horowitz put Tanium on the map in 2014 when it put $90 million into the company and another $52 million as part of a $120 million round in 2015, led by TPG Capital, T. Rowe Price and Institutional Venture Partners. Andreessen Horowitz’s big stake was done at the urging of one of its advisers, former Microsoft executive Steven Sinofsky, who called Tanium’s technology “magic.”
But the company didn’t sell any equity to raise any operating funds for itself. Hindawi, the son, also said he’s not cashing out any of his shares, nor is he buying more shares.
“I own 25% of the company and I think that’s more than enough for me. Between David and me, we are still above 50% of the company,” he said. He refers to his dad by his first name at the office.
On top of that, the company uses a “multi-class structure,” for shares he said. That refers to dividing shares up into those that have more voting rights than others. It’s an increasingly common move for startups, and sometimes even public tech companies (like Alphabet). This allows founders to retain control of the company, even if they don’t control a majority of shares.
And he’s unabashed that he’s locked down control away from investors, very much on purpose, thanks to lessons earned from their earlier startup.
“One of the things that drove us to found this company was that at BigFix, our last company, we had a real challenge corralling the investors to do anything actually. They had the majority of the company so a lot of it was really difficult, frankly, Hindawi said. With control of Tanium firmly in the family, he says making decisions is far easier.
Yes, I’ve fired people
Hindawi just faced a slew of bad press when he was accused of firing people immediately before their options vested, according to that story by Bloomberg.
The implication was that if too much stock wound up in the hands of employees, his controlling stake and authoritative power over the company would be diminished.
Hindawi admitted he’s fired people, but denied he was motivated by their stock options. He calls that accusation “very obviously, provably not true,” he said and says that he had all sorts of reasons why there have been “a lot of people who left Tanium, not of their own volition.” He said some people were asked to leave because they were hired when the company was smaller but as it grew to 550 employees, “they were not the right people for their roles.”
He said in other cases executives had “health issues” and “could not do the job anymore” and characterizes the way they left the company as “respectful.” He says others were fired for “ethics issues.”
At the same time, he can understand why former employees might have lashed out.
“When you’ve got executives or people that leave a company, sometimes they don’t like it,” he said. “Sometimes they don’t think they were fairly treated.
“They may be right in some cases,” he added. “We could have done some things differently.”
As for accusations that he has mocked people or insulted them.
“Very obviously I don’t agree with the description,” he told us.
On the other hand, he also fully admits that the company’s culture is rather hard-edged.
“Our business is not easy,” Hindawi said. “We’re securing the biggest companies in the world, and it’s a very big, demanding, stressful thing.”
He added: “I want to treat my people with respect and decency. But at the same time, I want them to be in an environment where they can achieve great things, and it turns out great things are not cuddly. They’re not easy. It’s a lot of hard work.
He believes that part of the reason Tanium gets a bad rap is because it’s not a perk-filled, employee-pampering Valley-style startup, he said.
But with this new secondary offering, the implication is, those who want to cash-out and leave can do so. So can those who want to cash out and stay.