9 Hot Cybersecurity Startups
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In a recent article, we discussed the topic of cybersecurity and gave you 10 publicly traded cyber security companies you could invest in to play this theme. As with any technology niche, some of the most exciting players are often startups because they are high risk and high reward. For retail investors, it becomes very difficult to invest in startups but nonetheless, you should be aware of what they are up to because those publicly traded stocks you hold might just be displaced by a nimble startup.
So how can we tell which cybersecurity startups are the hottest? The best way is to follow the money and look at what venture capital (VC) investors think is hot. One of the ways you can tell is by looking at what valuations VCs are ascribing to startups, especially those which they value at over $1 billion (otherwise known as unicorns). Let’s take a look at 9 cybersecurity unicorns, any of which just might be the next Symantec. This list of companies was derived from a real-time list of unicorns maintained by the bright minds at CB Insights (there are 176 unicorns in total at the moment). All of these companies are valued at $1 billion except for Tanium ($3.5 billion) and Okta ($1.2 billion).
Founded in 2007, Tanium has taken in just over $300 million in funding to develop an “endpoint security and management system”. In the world of cybersecurity, an “endpoint” is any device (computer, tablet, smartphone) that is connected to a corporate network. Tanium provides the only platform of its kind which offers a Google-like search that will scan millions of endpoints across your entire enterprise. You can use the platform to reactively identify security breaches or to proactively query your endpoints using natural language with results returned in less than 15 seconds. No more pesky emails from some IT guy in Mumbai asking you if you installed that security patch yet.
Update 06/25/2020: Tanium has raised about $100 million from Salesforce at a $9 billion valuation. The two companies are working together to “develop an employee service solution for the new all-digital, work-from-anywhere world.” This brings the company’s total funding to $900 million to date.
Founded in 2009, Okta has taken in $228 million in funding to become the leading “provider of identity” for enterprises. If you are completely old school like we are, you would probably remember Novell Directory Services (NDS) which was an ancient tool used in the past to manage access to computer resources and keep track of users on your network. That’s what Okta does except a million times better and they allow your enterprise to integrate with over 5,000 different apps using a single sign on (SSO). As you would expect, the entire thing lives up in “the cloud“.
Founded in 2000, ForeScout has taken in around $121 million to identify unknown devices as soon as they connect to a network. There is no need to install any sort of client on devices for it to see them or keep track of them. In a world where we expect to soon have billions of IoT devices connecting to our networks, the ForeScout solution takes control immediately of devices that attach to your network and keeps you in the loop at all times about endpoints that are coming or going. Discovering endpoints in 15 seconds or less is old news. ForeScout can discover and classify endpoints in 5 seconds or less. You hearing that Tanium?
Also founded in 2009, CloudFlare has taken in $182 million in funding to develop a web performance and cybersecurity solution that both protects your website and makes it go faster. Any website owner can use their solution and on average a website that uses CloudFlare loads twice as fast, uses 60% less bandwidth and is way more secure. The idea is that lots of crawlers, bots, and unsavory characters will try to attack your website and these guys can filter out all that junk which saves you money and offers a better experience for your users. The basic offering from CloudFlare is free (though prepare to be upsold), and 2 million web properties have already adopted it so far. We’ve practically convinced ourselves already that we need the CloudFlare solution.
Update 03/12/2019: Cloudflare has taken in $150 million in private funding to continue its international expansion into new markets. Rumors are that an IPO is next. This brings total funding to $332.1 million to date.
Founded in 2007, Lookout has taken in $282 million so far from some big names like Jeff Bezos, Goldman Sachs, Deutsche Telekom, Khosla Ventures, Morgan Stanley, and Qualcomm. Lookout has a global network of more than 60 million mobile users who send data up to “the cloud” so that Lookout has a dataset containing virtually all the mobile code in the entire world. They then analyze all that “big data” using predictive machine learning algorithms in order to stop cybercriminals from attacking mobile devices. The world’s leading mobile network operators all use Lookout and it’s pretty apparent why all these big name investors want a piece of that action.
Founded in 1988, AVAST Software has taken in $100 million of which they’ve used to make 4 acquisitions including last month’s $1.3 billion acquisition of rival AVG Technologies. Remember when cybersecurity referred mainly to antivirus software? That’s what these guys do, except they provide an antivirus solution that doesn’t bog down your computer because a significant portion of the analysis is performed (you guessed it) in the cloud. More than 230 million people use Avast technology to secure their devices making Avast number one in the world for antivirus software. You might recall that McAfee used to be the preferred choice but their bloatware pissed off so many people that John McAfee himself said of the Intel acquisition “I am now everlastingly grateful to Intel for freeing me from this terrible association with the worst software on the planet“. In other words, the opportunity for a lightweight cloud-based antivirus software was ripe for the picking.
Founded in 2008, Zscaler has taken in $148 million to revolutionize internet security with the industry’s first Security as a Service platform. This is just another way of saying that their solution lives in the cloud. Now you can surf any website you like from your home or office and not have to worry about picking up any malware or viruses. The Zscaler tagline pretty much sums it up by saying that they’re “working to make the Internet safe for business“. The software is used by more than 5,000 leading organizations and blocks more than 125 million threats per day.
Founded only three years ago in 2013, Illumio has already taken in $142 million to build a data center and cloud security solution that “protects 80% of the traffic missed by the perimeter”. Now the technical explanations for what these guys do could get completely out of hand in no time so we’ll try to keep it simple. We explained to you what the cloud is. These guys build security solutions for the data centers which comprise the cloud. This means that potential clients would include any firm that provides a cloud-based solution to their clients. ‘Nuff said.
Update 02/07/2019: Illumio has raised $65 million in Series E funding that will help the business further expand into international markets, to meet market demand, and continue to enable customers to prevent the spread of breaches in their global infrastructures. This brings the company’s total funding to $335.2 million to date.
With a name like Cylance, you just know that they’re going to be using some sort of artificial intelligence in their cybersecurity solution. Founded in 2012, Cylance has taken in $177 million so far to tackle the world’s most difficult security problems using machine learning. The Cylance solution is for endpoints (remember those from earlier?) and uses just 1% of CPU and 60MB of memory to operate on a machine without any internet connectivity. In live demonstrations, Cylance has shown that their antivirus can stop over 99% of existing and never before seen viruses while other industry giants could only stop 40%. This is because traditional antivirus software needs to see the “signature” of viruses while the Cylance solution just figures that isht out in real-time using the wonders of machine learning and with no internet connection. Maybe Cylance should be AVAST Software’s 5th acquisition.