Cato Scores $238 Million on $3 Billion Valuation

Will Cato Networks be the next tech IPO?

That’s the question prompted by today’s announcement that the secure access service edge (SASE) pioneer has scored $238 million in equity financing on a valuation of $3 billion. And it looks like the vendor is addressing the issue directly, acknowledging that it’s eyeing a 2024 public bid.

“We continue to say that Cato will be ready for IPO in the second half of 2024,” stated Yishay Yovel, Chief Strategy Officer (CSO) at Cato Networks, in an emailed statement. “Whether we actually IPO or not will depend on market conditions. We see some indication that the appetite for high-growth IPOs among investors may be returning and is expected to increase into 2024. The executive team will continue to keep an eye on the situation and make an appropriate determination at the right time.”

The IPO question isn’t a new one for Cato. It came up after the company’s last funding round, a $200 million Series F in 2021. At that time, management seemed to be focused on further growth instead of going public, though that appeared to be at least a consideration for the future. Then, as now, the funds were slated to be used for ongoing global growth. But now it’s looking as though going public is on the horizon.

A Solid Foundation for IPO

Surely, it makes sense for Cato to eye an IPO. Perhaps no vendor has leveraged the term SASE as much as Cato has. Even before the term was coined, Cato touted the security and performance of its alternative, secure network of over 65 points of presence (PoPs) worldwide, which are powered by software-defined wide area networking (SD-WAN). It now claims over 1,800 enterprise customers for its MPLS-alternative service. And late last year, Cato claimed to have reached $100 million in annual recurring revenue (ARR).

Part of Cato’s success is attributed to its architecture, which contains what the vendor calls a Single Pass Cloud Engine, or Cato SPACE. Simply put, this is Cato’s software stack, implemented on multiple compute nodes and processing cores. This design ensures that each Cato customer has access to a virtual network that allows endpoints to link to private data centers or clouds based on identity and context, while maintaining performance via cloud-based orchestration. It’s a solution that addresses a growing need for scalable, secure private network services – as opposed to latching point products onto other services.

Cato’s approach has made it a leading contender, along with Versa Networks, Arrcus, Aryaka Networks, and others in bringing software-based networking platforms to help enterprises handle edge challenges. And as edge computing becomes more prolific, it stands to reason that Cato and its competitors will continue to see growth in that area.

Cato’s latest and largest financing round was led by LightSpeed Venture Partners with participation from Adams Street Partners, SoftBank Vision Fun 2, Sixty Degree Capital, and Singtel Innov8.

Futuriom Take: Expect to see Cato launch an IPO as soon as market conditions warrant, although when that will be remains in question.