How Washington Harbour approaches relationships before an acquisition

Washington Harbour Partners likes to take a more methodical approach to its acquisitions in the government market.

The private equity firm largely avoids auctions for potential targets in favor of taking time to develop a relationship with executive teams at those companies.

“We like to get to know founders and their companies and build a conviction,” said Mina Faltas, the firm’s founder and managing member.

That process can take time, and in some instances years. Washington Harbour used that process when it pulled together several companies to create Groundswell in 2022 under the leadership of industry veterans George Batsakis and Jerad Speigel.

Washington Harbour went back to that process again in November when it acquired SixGen, a provider of cybersecurity products and services.

“We get to know them. They get to know us. Ultimately, they pick us,” Faltas said. “Our investment approach is flexible and tailored to the founder and the platform they want to build.”

The addition of SixGen is a cybersecurity play and specifically targets the offensive aspect, but this is not the kind of cyber for attacking an adversary’s system.

SixGen's process instead involves discovering your own vulnerabilities, said Ralph Kahn, an operating partner at Washington Harbour.

Today’s IT environment is highly complex with different systems connecting to each other that share data and analytical tools, and so on. Many gaps and vulnerabilities are hard to identify.

“The only way to really get to them is through red teaming,” Kahn said.

SixGen's definition of red teaming in this case is pointing a white hat hacker at your organization and asking them to break it.

“The reality is unless you have someone actually trying to hack into your system, you are going to miss the holes in your defenses,”  Kahn said.

That kind of offensive cyber also feeds back into better defensive cyber.

“Better defensive cyber is built off the back of offensive cyber,” Kahn said.

Washington Harbour sees SixGen as one of the few offensive cyber companies that can bring those capabilities at scale to federal agencies. SixGen's services include red teaming, threat hunting, and incident response.

“We feel like the offensive cyber world is ripe for exponential growth and with the advent of more effective intelligence it is possible to do things now that we couldn’t before,” he said.

Faltas and Kahn declined to say how much revenue SixGen currently generates. But they told me SixGen's workforce exceeds 100 employees and strategic hires are in the works as part of their organic growth strategy.

And of course, there will be more acquisitions. In fact, they have been having some of those conversations for the past two years.

“The founders who pick us want a good partner that has the capabilities, network and resources to help them unlock the next stage of growth and value in their business,” Faltas said. “We are looking to be a partner and force multiplier.”

They didn’t disclose what is on their shopping list for other SixGen acquisitions, but Faltas and Kahn said they are looking for complementary pieces that could involve technology or customers. The fit from a business and culture standpoint has to be there.

“We are not financial engineers,” Faltas said. “We are not building Frankenstein and just stitching companies together. We are technology investors and we want to build platforms with high caliber capabilities that provide value to government customers.”

The timing of the next buy is on the “sooner side,” though Faltas didn’t commit to a timeline.