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Cybersecurity Startup CrowdStrike Joins Unicorn Club

Nothing like worldwide cyber-attacks and a computer hack into a major political party’s servers to motivate investors. We’re not suggesting that cybersecurity startup CrowdStrike didn’t earn its entry this month into the vaunted Unicorn Club with hard work, but the recent uptick in cyberwarfare is certainly good for the bottom line. Apparently paranoia won’t just destroy-ya, it will make you some money-ya.

The six-year-old company from Irvine, California, closed a $100 million Series D round led by Accel Partners, which also took the lead in the company’s previous Series A and Series B rounds. That brought total disclosed fund-raising to $256 million and a $1 billion valuation. It’s not surprising to see Accel’s name top the investors. It ranks No. 3 among VC backers to cybersecurity startups, according to data firm CB Insights. Accel is also one of the top VC firms for tech in general.

CrowdStrike Uses Machine Learning

CrowdStrike had raised $100 million less than two years ago in a Series C round led by CapitalG that also included Accel. CEO and co-founder George Kurtz actually told the New York Times the company didn’t even need the cash but decided to seek new funds earlier this year anyway. The fresh greenbacks will reportedly help fuel CrowdStrike’s geographic expansion and development of new products. It may also look to swallow up a few startups of its own with some modest acquisitions. In the same article, Kurtz said CrowdStrike has no plans to IPO any time soon.

The company’s flagship product is its cloud-based Falcon Platform, a suite of cybersecurity solutions. That means Falcon only requires a small bit of computing real estate (only 20Mb), with most of the services powered on remote servers. The company says it uses a form of artificial intelligence called machine learning to help prevent attacks before they even occur. Most anti-virus software relies on a library of known types of malware and other types of malicious software, with the need to push constant updates as new threats emerge. The Falcon platform, in contrast, uses algorithms to spot suspicious activity that hasn’t been previously identified. Last month, we covered six cybersecurity startups that CB Insights recognized for their innovative use of AI in similar platforms.

CrowdStrike Strikes it Big

CrowdStrike claims that it is well-loved among the corporate bigwigs. Among its customer stats: three of the 10 largest global companies by revenue; five of the 10 largest financial institutions; three of the top 10 health care providers, and three of the top 10 energy companies. It also says its customer base spans 176 countries and that it processes 40 billion security events each day. That doesn’t even include President Trump’s daily security briefings.

Speaking of which: The company first gained some notoriety for linking the Russian government to the hacking of the Democratic National Committee.

CrowdStrike has a number of case studies online for those with a bad case of insomnia. We read a few to give you a flavor of what they do. For example, one financial services company with more than 60,000 endpoints and 15,000 servers that worked across a variety of operating systems was in need of a better security solution. CrowdStrike came in and deployed the Falcon suite within hours, with no reboots or even calls to the help desk. You can also listen to this guy tell you how great CrowdStrike is for its customers:

Cybersecurity on the Rise

Another cybersecurity unicorn, Okta, did recently opt to IPO. Trading on the Nasdaq under OKTA, the startup went public last month in hopes of raising $100 million, targeting a share price of $17 with 11 million shares in the offering. Instead, the company debuted at $23.50 a share and grabbed about $187 million, with a market cap of $2.2 billion. It had been valued at about $1.5 billion before going public. The company had been backed by heavyweight VC firms like Andreessen Horowitz, Greylock Partners, Khosla Ventures and Sequoia Capital.

Credit: CB Insights

It’s been a good year overall for cybersecurity firms. CB Insights recently blogged that the industry is on pace to close a record number of deals (509) and to match the $3.9 billion raised in 2015 based on current trends. Still, investors will have to throw down some serious cash this year to keep pace. The only mega round so far in 2017 has been the $100 million to CrowdStrike. In 2015, there were five mega-rounds, including a quarter-billion Series B to Tenable Network Security from Accel Partners and Insight Venture Partners, according to CB Insights. Tenable has also raised the most money among cybersecurity startups at $302 million with a $3.5 billion valuation. (CrowdStrike is No. 4 on the list of most well-funded cybersecurity startups.) Last year, there were four mega-rounds to cybersecurity companies. The Unicorn Club currently lists eight cybersecurity startups among its members.

The bright minds over at CB Insights noted that in the first quarter of this year deals to cybersecurity startups hit an all-time high with nearly 140 companies securing funding rounds. This quarter, more than 50 cybersecurity companies have grabbed nearly $600 million so far. For example, San Francisco-based Wandera secured $27.5 million in a Series C round this month in equity and debt financing, Xconomy reported. Total funding to Wandera hit $53.5 million. The startup focuses on mobile security and uses AI to identify ransomware programs. Xconomy also noted that automotive cybersecurity startup Karamba raised a $12 million Series B this month, bringing total funding to $17 million over three rounds. Karamba’s tech promises to keep hackers from seizing control of your autonomous car and driving it over a cliff. Best to leave that to drivers using Apple map products.

Conclusion

There’s certainly no reason to think the cybersecurity industry is going off a cliff any time soon. Forbes reported that cybersecurity will be worth $170 billion by 2020. More than half of deals in cybersecurity have been at early stage rounds since 2013, according to CB Insights, implying that “in an evolving cyber-threat landscape, new solutions are still needed that can help mitigate and perhaps even help predict attacks”. One thing we can predict with good old-fashioned HI (human intelligence): Cyber-attacks will only grow more sophisticated, and companies like CrowdStrike are needed now more than ever.

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