Security Funding Boom: $400M in Deals in One Week


By: R. Scott Raynovich

It's been an interesting week in the security startup world, with hundreds of millions of dollars going into hot security startups, including monster rounds for venture-backed companies Illumio and Netskope as well as Microsoft's acquisition of Hexadite for a reported $100 million.

Coincidentally (or not), this comes the same week that we released our 25-page report, "Endpoint Security and SysSecOps: The Growing Trend to Build a More Secure Enterprise"-- download it here to take a look some key security trends. In other news, Cisco announced this week that Distributed Denial of Service (DDoS) attacks have grown to an average of 1.2 Gbps in scale, enough to take down the largest operations.

It reminds me of something my Dad is always asking me: "Scott, why can't all this security technology stop the hackers?"

The answer is that the hackers are always a step ahead and they can never be totally stopped. Security is not about plugging all the holes -- it's about mitigating them in real time, rather than months after the fact, as as the case in the hacking of the Democratic National Committee (DNC), Yahoo, and many others.

So, let's queue up the news on this security funding week:

Illumio, a cloud security wunderkind funded by top-tier venture capitalists (VCs) including Accel, Andreessen Horowitz, Blackrock, and General Catalyst, announced a $125M Series D funding round let by JP Morgan. This round comes two years after a $100M Series C round bringing its total funding to $267M. Illumio had previously received a lot of attention for becoming a “unicorn" -- or a startup valued at at least a billion dollars. Illumio Chief Commercial Officer Alan Cohen told that he could not confirm a valuation but said the funding was an “up” round, giving it a higher valuation than the previous valuation. This is interesting and runs somewhat contrary to the recent buzz that Illumio was not meeting such high expectations. One of the knocks on Illumio is that it requires installation of its own software agents, which can slow adoption. But the VCs appear to like it, nonetheless.

Netskope, a cloud access service broker (CASB) which patrols the cloud services for security threats, announced $100 million in a funding round co-led by Lightspeed Venture Partners and Accel. New investors Sapphire Ventures and Geodesic Capital joined existing investors Social Capital and Iconiq Capital in the round. Netskope has raised a total of $231.4 million to date. “This funding will allow us to achieve financial independence,” CEO Sanjay Beri wrote to Venture Beat.

Microsoft on Thursday confirmed that it has acquired Hexadite, an Israeli startup. TechCrunch reported the the deal at $100M. Hexadite uses artificial intelligence data to identify and mitigate attacks. Several news organizations predict the deal was coming ahead of time.

Fortune reported that some of the former members from endpoint security firm Cylance have started Obsidian Security, which has raised $9.5 million in funding from Greylock Partners. Glenn Chisholm, formerly the chief technology officer of Cylance and a former chief information security officer of the Australian telecom giant Telstra, is Obsidian's CEO. Chisholm is joined by Ben Johnson, previously co-founder and chief security strategist at Carbon Black, who will be Obsidian's chief technology officer.

IoT security startup Armis raised a $17 million funding round to build out its channel program around its agentless IoT security platform.

Despite the flood of cash, all of this funding activity is not likely to instantly solve the growing challenge of cybersecurity, which is as much an organizational management problem as a technology problem, according to the findings of Futuriom's Endpoint Security and SysSecOps report. In the report, a survey of 149 IT staff, security staff, and executive management found that 64.83% of survey respondents, chose “Better management of security budget across divisions/silos” as one of the top goals in improving security infrastructure. Next in line was “Better integration between systems management and security operations tools,” at 31.03%; “Better security tools with more features,” 26.90%; and more staff training 13.10%.

For more information on trends in cybersecurity, download our free 25-page report, "Endpoint Security and SysSecOps: The Growing Trend to Build a More Secure Enterprise,"which reveals that many IT and security operations managers have challenges delivering a comprehensive information security approach, including inter-department coordination, endpoint security technology integration, and resources.