Feb
19
2020
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SentinelOne raises $200M at a $1.1B valuation to expand its AI-based endpoint security platform

As cybercrime continues to evolve and expand, a startup that is building a business focused on endpoint security has raised a big round of funding. SentinelOne — which provides a machine learning-based solution for monitoring and securing laptops, phones, containerised applications and the many other devices and services connected to a network — has picked up $200 million, a Series E round of funding that it says catapults its valuation to $1.1 billion.

The funding is notable not just for its size but for its velocity: it comes just eight months after SentinelOne announced a Series D of $120 million, which at the time valued the company around $500 million. In other words, the company has more than doubled its valuation in less than a year — a sign of the cybersecurity times.

This latest round is being led by Insight Partners, with Tiger Global Management, Qualcomm Ventures LLC, Vista Public Strategies of Vista Equity Partners, Third Point Ventures and other undisclosed previous investors all participating.

Tomer Weingarten, CEO and co-founder of the company, said in an interview that while this round gives SentinelOne the flexibility to remain in “startup” mode (privately funded) for some time — especially since it came so quickly on the heels of the previous large round — an IPO “would be the next logical step” for the company. “But we’re not in any rush,” he added. “We have one to two years of growth left as a private company.”

While cybercrime is proving to be a very expensive business (or very lucrative, I guess, depending on which side of the equation you sit on), it has also meant that the market for cybersecurity has significantly expanded.

Endpoint security, the area where SentinelOne concentrates its efforts, last year was estimated to be around an $8 billion market, and analysts project that it could be worth as much as $18.4 billion by 2024.

Driving it is the single biggest trend that has changed the world of work in the last decade. Everyone — whether a road warrior or a desk-based administrator or strategist, a contractor or full-time employee, a front-line sales assistant or back-end engineer or executive — is now connected to the company network, often with more than one device. And that’s before you consider the various other “endpoints” that might be connected to a network, including machines, containers and more. The result is a spaghetti of a problem. One survey from LogMeIn, disconcertingly, even found that some 30% of IT managers couldn’t identify just how many endpoints they managed.

“The proliferation of devices and the expanding network are the biggest issues today,” said Weingarten. “The landscape is expanding and it is getting very hard to monitor not just what your network looks like but what your attackers are looking for.”

This is where an AI-based solution like SentinelOne’s comes into play. The company has roots in the Israeli cyberintelligence community but is based out of Mountain View, and its platform is built around the idea of working automatically not just to detect endpoints and their vulnerabilities, but to apply behavioral models, and various modes of protection, detection and response in one go — in a product that it calls its Singularity Platform that works across the entire edge of the network.

“We are seeing more automated and real-time attacks that themselves are using more machine learning,” Weingarten said. “That translates to the fact that you need defence that moves in real time as with as much automation as possible.”

SentinelOne is by no means the only company working in the space of endpoint protection. Others in the space include Microsoft, CrowdStrike, Kaspersky, McAfee, Symantec and many others.

But nonetheless, its product has seen strong uptake to date. It currently has some 3,500 customers, including three of the biggest companies in the world, and “hundreds” from the global 2,000 enterprises, with what it says has been 113% year-on-year new bookings growth, revenue growth of 104% year-on-year and 150% growth year-on-year in transactions over $2 million. It has 500 employees today and plans to hire up to 700 by the end of this year.

One of the key differentiators is the focus on using AI, and using it at scale to help mitigate an increasingly complex threat landscape, to take endpoint security to the next level.

“Competition in the endpoint market has cleared with a select few exhibiting the necessary vision and technology to flourish in an increasingly volatile threat landscape,” said Teddie Wardi, managing director of Insight Partners, in a statement. “As evidenced by our ongoing financial commitment to SentinelOne along with the resources of Insight Onsite, our business strategy and ScaleUp division, we are confident that SentinelOne has an enormous opportunity to be a market leader in the cybersecurity space.”

Weingarten said that SentinelOne “gets approached every year” to be acquired, although he didn’t name any names. Nevertheless, that also points to the bigger consolidation trend that will be interesting to watch as the company grows. SentinelOne has never made an acquisition to date, but it’s hard to ignore that, as the company to expand its products and features, that it might tap into the wider market to bring in other kinds of technology into its stack.

“There are definitely a lot of security companies out there,” Weingarten noted. “Those that serve a very specific market are the targets for consolidation.”

Jan
05
2020
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CrowdStrike’s CEO on how to IPO, direct listings and what’s ahead for SaaS startups

A few days before Christmas, TechCrunch caught up with CrowdStrike CEO George Kurtz to chat about his company’s public offering, direct listings and his expectations for the 2020 IPO market. We also spoke about CrowdStrike’s product niche — endpoint security — and a bit more on why he views his company as the Salesforce of security.

The conversation is timely. Of the 2019 IPO cohort, CrowdStrike’s IPO stands out as one of the year’s most successful debuts. As 2020’s IPO cycle is expected to be both busy and inclusive of some of the private market’s biggest names, Kurtz’s views are useful to understand. After all, his SaaS security company enjoyed a strong pricing cycle, a better-than-expected IPO fundraising haul and strong value appreciation after its debut.

Notably, CrowdStrike didn’t opt to pursue a direct listing; after chatting with the CEO of recent IPO Bill.com concerning why his SaaS company also decided on a traditional flotation, we wanted to hear from Kurtz as well. The security CEO called the current conversation around direct listings a “great debate,” before explaining his perspective.

Pulling from a longer conversation, what follows are Kurtz’s four tips for companies gearing up for a public offering, why his company elected chose a traditional public offering over a more exotic method, comments on endpoint security and where CrowdStrike fits inside its market, and, finally, quick notes on upcoming debuts.

The following interview has been condensed and edited for clarity.

How to go public successfully

Share often

What’s most important is the fact that when we IPO’d in June of 2019, we started the process three years earlier. And that is the number one thing that I can point to. When [CrowdStrike CFO Burt Podbere] and I went on the road show everybody knew us, all the buy side investors we had met with for three years, the sell side analysts knew us. The biggest thing that I would say is you can’t go on a road show and have someone not know your company, or not know you, or your CFO.

And we would share — as a private company, you share less — but we would share tidbits of information. And we built a level of consistency over time, where we would share something, and then they would see it come true. And we would share something else, and they would see it come true. And we did that over three years. So we built, I believe, trust with the street, in anticipation of, at some point in the future, an IPO.

Practice early

We spent a lot of time running the company as if it was public, even when we were private. We had our own earnings call as a private company. We would write it up and we would script it.

You’ve seen other companies out there, if they don’t get their house in order it’s very hard to go [public]. And we believe we had our house in order. We ran it that way [which] allowed us to think and operate like a public company, which you want to get out of the way before you come become public. If there’s a takeaway here for folks that are thinking about [going public], run it and act like a public company before you’re public, including simulated earnings calls. And once you become public, you already have that muscle memory.

Raw numbers matter

The third piece is [that] you [have to] look at the numbers. We are in rarified air. At the time of IPO we were the fastest growing SaaS company to IPO ever at scale. So we had the numbers, we had the growth rate, but it really was a combination of preparation beforehand, operating like a public company, […] and then we had the numbers to back it up.

TAM is key, even at scale

One last point, we had the [total addressable market, or TAM] as well. We have the TAM as part of our story; security and where we play is a massive opportunity. So we had that market opportunity as well.


On this topic, Kurtz told TechCrunch two interesting things earlier in the conversation. First that what many people consider as “endpoint security” is too constrained, that the category includes “traditional endpoints plus things like mobile, plus things like containers, IoT devices, serverless, ephemeral cloud instances, [and] on and on.” The more things that fit under the umbrella of endpoint security, CrowdStrike’s focus, the bigger its market is.

Kurtz also discussed how the cloud migration — something that builds TAM for his company’s business — is still in “the early innings,” going on to say that in time “you’re going to start to see more critical workloads migrate to the cloud.” That should generate even more TAM for CrowdStrike and its competitors, like Carbon Black and Tanium.


Why CrowdStrike opted for a traditional IPO instead of a direct listing

Dec
30
2019
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Seed investors favor enterprise over consumer for first time this decade

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

It’s the second to last day of 2019, meaning we’re very nearly out of time this year; our space for repretrospection is quickly coming to a close. Before we do run out of hours, however, I wanted to peek at some data that former Kleiner Perkins investor and Packagd founder Eric Feng recently compiled.

Feng dug into the changing ratio between enterprise-focused Seed deals and consumer-oriented Seed investments over the past decade or so, including 2019. The consumer-enterprise split, a loose divide that cleaves the startup world into two somewhat-neat buckets, has flipped. Feng’s data details a change in the majority, with startups selling to other companies raising more Seed deals than upstarts trying to build a customer base amongst folks like ourselves in 2019.

The change matters. As we continue to explore new unicorn creation (quick) and the pace of unicorn exits (comparatively slow), it’s also worth keeping an eye on the other end of the startup lifecycle. After all, what happens with Seed deals today will turn into changes to the unicorn market in years to come.

Let’s peek at a key chart from Feng, talk about Seed deal volume more generally, and close by positing a few reasons (only one of which is Snap’s IPO) as to why the market has changed as much as it has for the earliest stage of startup investing.

Changes

Feng’s piece, which you can read here, tracks the investment patterns of startup accelerator Y Combinator against its market. We care more about total deal volume, but I can’t recommend the dataset enough if you have the time.

Concerning the universe of Seed deals, here’s Feng’s key chart:

Chart via Eric Feng / Medium

As you can see, the chart shows that in the pre-2008 era, Seed deals were amply skewed towards consumer-focused Seed investments. A new normal was found after the 2008 crisis, with just a smidge under 75% of Seed deals focused on selling to the masses for nearly a decade.

In 2016, however, a new trend emerged: a gradual decline in consumer Seed deals and a shift towards enterprise investments.

This became more pronounced in 2017, sharper in 2018, and by 2019 fewer than half of Seed deals focused on consumers. Now, more than half are targeting other companies as their future customer base. (Y Combinator, as Feng notes, got there first, making a majority of investments into enterprise startups since 2010, with just a few outlying classes.)

This flip comes as Seed deals sit at the 5,000-per-quarter mark. As Crunchbase News published as Q3 2019 ended, global Seed volume is strong:

So, we’re seeing a healthy number of deals as the consumer-enterprise ratio changes. This means that the change to more enterprise deals as a portion of all Seed investments isn’t predicated on their number holding steady while Seed deals dried up. Instead, enterprise deals are taking a rising share while volume appears healthy.

Now we get to the fun stuff; why is this happening?

Blame SaaS

As with many trends long in the making, there is no single reason why Seed investors have changed up their investing patterns. Instead, there are likely a myriad that added up to the eventual change. I’m going to ping a number of Seed investors this week to get some more input for us to chew on, but there are some obvious candidates that we can discuss today.

In no particular order, here are a few:

  • Snap’s IPO: Snap went public in early 2017 at $17 per share. Its equity quickly spiked to into the high 20s. By July of that same year, Snap slipped under its IPO price. Its high-growth, high-spend model was under attack by both high costs and slim gross margins. Snap then went into a multi-year purgatory before returning to form — somewhat — in 2019. It’s not great for a category’s investment pace if one of its most prominent companies stumble very publicly, especially for Seed investors who make the riskiest bets in venture.

May
17
2017
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CrowdStrike, the firm investigating Russian hacks, raised $100M, now valued around $1B

 The business of hacking has dealt a huge blow to our democracy, not to mention a plethora of organizations and individuals, and our collective sense of sanity. One silver lining, however, has been that it has led to the emergence of a number of security startups that are building and deploying a range of tools to try to track and stop the nefarious activity. One of the larger of these… Read More

Jul
13
2015
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Security Company CrowdStrike Scores $100M Led By Google Capital

Zeros and ones in green with a red Protection in the midst of it. If you need proof that security is a red hot market these days, how about this morning’s announcement that cybersecurity company CrowdStrike landed a $100 million Series C investment round? The round was led by Google Capital with Rackspace, which happens to be one of the company’s customers also investing. Existing investors Accel and Warburg Pincus also participated.… Read More

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