Encryption fears dampen Warrior’s raise


James Riley
Editorial Director

Sydney-headquartered cyber outfit Secure Code Warrior just raised a record US$47 million ($68.5m) as part of a global expansion plan, but the company has warned it would shift development operations offshore if Australia’s controversial encryption laws start to impact customer trust.

Secure Code Warrior chief executive Pieter Danhieux was upbeat on Wednesday in announcing the Series B round led by Goldman Sachs and including new investors Forgepoint Capital and Cisco Investments, additional commitments from existing investors AirTree and US-based Paladin Capital.

But Mr Danhieux said he remains concerned about the extent of the encryption laws in Australia and worries that customers from around the world might start to question the whether Secure Code Warrior should conduct development in Australia.

Pieter Danhieux
Pieter Danhieux Secure Code Warrior

Currently Sydney is the headquarters and global centre of gravity for Secure Code Warrior and is one of two development centres for the company. The other development centre is in Belgium.

Asked whether the company would consider moving its software development operations from Sydney if the encryption regime in Australia started to impact the company’s reputation or sales, he said “Absolutely. If my customers are starting to make it more difficult to do business with them, we would move development.

“Because we already have development in Belgium and we are starting in South Africa, I think we should shift the development of our product outside of Australia,” Mr Danhieux told InnovationAus.

Against stellar revenue growth of 100 per cent for the past three consecutive years, Mr Danhieux said he hadn’t seen a real business impact. But he is worried that this is only because not many of foreign-based customers are aware of the encryption laws in Australia and have not questioned the company.

“I am worried that once they know the extent of the laws, we are going to get questioned a lot and scrutinised on whether we are going to continue developing inside Australia or not.”

He remained hopeful that the laws would be modified.

“I just hope that if they approach one of my employees to modify code for whatever purpose that they would actually notify the company. Because doing it behind the back of management does not seem like a good idea.”

Sydney Code Warrior board member Jim Pflaging who is managing partner at San Francisco-based Cynergy Partners said all technology companies had to “keep a close eye on the privacy regimes and encryption regimes that are coming.”

He said the regulatory environments around privacy, encryption and security were still developing and that companies had to keep an eye on this regulatory environment in order to make the right business decision.

“If you’re going to keep the data resident in a country, you’re going to do it on the simple economics of ‘Is it worth it?,” Mr Pflaging told InnovationAus.

“Personally, I think strong encryption is good, and I think forcing companies to sort of hand over keys and open things up would be a mistake,” he said. “But this is a long running movie and the policy continues to unfold.”

Meanwhile, Mr Danhieux said the Series B capital raise would help fund a significant global expansion. The company had bootstrapped the business since its founding in 2015 and was already producing significant revenue when it took a small Series A fuding round of $3.5 million in September last year.

Having now secured a Series B round more than 12 times bigger than its initial raise and led by blue-chip partners in the US, the company is looking to continue its global expansion.

In addition to its Sydney headquarters and its second development centre in Belgium, Secure Code Warrior has offices in Boston, Portland and London and it is soon to open Singapore office.

Secure Code Warrior is an online secure coding platform that helps Developers to think and act with a security mindset every day.

“The new front in the cybersecurity war is being fought by software developers. Secure Code Warrior is focused on helping developers write code more securely, and they have emerged as a clear global leader in developer driven cybersecurity,” said AirTree Ventures partner James Cameron.

“It’s fantastic to see Australian based technology like this being exported around the globe [and] we’re excited to be doubling down and supporting them in their global expansion,” he said.

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