Cybereason gets $25 million from an odd pair: consumer-focused Spark and defense contractor Lockheed Martin
Cybereason, a cybersecurity company based in Cambridge, MA, just announced that it has raised $25 million from a group of investors including Spark Capital and Lockheed Martin, along with prior backer CRV.
You're probably thinking, "Well, that's odd. How can one company draw interest from one of the more well-known consumer Internet investment firms AND the guys who make fighter jets and missiles?'
It's because with all the recent data breaches involving everyone from large corporate entities like Target and Sony to startups like Slack, IT security has not only become a mainstream and potentially lucrative investment opportunity; it also addresses threats to the day-to-day operations of almost any organization -- private or governmental -- storing data on the cloud or on private servers.
For many VC firms, the interest in cybersecurity startups makes sense as a way to balance the types of risks within their portfolio. From what I've been told, the security space is a safe bet for the time being that allows firms to mitigate the potential damage more risky investments can have on the returns of a given fund.
The reasoning is that cyber attacks are only going to become more prevalent as data and other information continue to be stored on computer systems and cloud platforms. This creates an enormous opportunity for a large, differentiated group of companies -- some that offer services to meet a single security need and others that provide a full suite of threat detection and prevention products --to make an impact in the space.
There are going to be a handful of winners in the cyber security industry, including many companies that are already established like FireEye and Symantec. But longtime players may also share the throne with upstarts like Cybereason.
For Spark, a firm best known for being an early backer of Twitter, Tumblr, RunKeeper, and Warby Parker, hedging on cybersecurity allows it to withstand risks that won't pan out -- Jelly, anyone? -- while taking leaps of faith on moonshot companies like Oculus VR.
But the interest for a company like Lockheed Martin, which has been linked with China-associated hacking breaches in the past, goes beyond the potential financial returns.
Cybereason differentiates itself in the growing cybersecurity market by combining both "white hat" security experts -- those, according to CEO Lior Div, who have never been malicious black hat hackers and have been working for the "good guys" all their lives -- and expert big data and information analysts.
"We took the challenge to build a technology from the ground up that allows us to look through different types of information, process it in real-time, and then decide whether someone is under attack or not, and, on top of that, to tell you the full story of that attack," Div said when asked what separates his company from others in the space.
With veterans of both the highly-regarded Israeli intelligence system and three-letter U.S. agencies like the NSA and CIA on its team, Cybereason has already proven its worth for one unnamed defense contractor. As Div explained, Cybereason was the only security vendor to prove and show the full story of a "super sensitive" cyber attack on the unnamed company.
"For us, it was a huge proof of value in a very short manner of time," said Div.
Cybereason initially connected with Lockheed as a potential customer. But once the company ran the security tools through a barrage of stress tests, Lockheed came back seeking to partner and invest in the cybersecurity company.
"They tested the product, and they came back and said that this is the only product that can provide the volume of protection that Lockheed wanted," Div said. "Those stories signal that there is something very unique about the implementation of our approach and the value that a customer can expect."
When asked if there was concern about having too close a relationship with an organization like Lockheed Martin that is so connected to the military industrial complex, Div explained that the partnership is a huge opportunity, but one of many. According to the CEO, Cybereason has three soon-to-be announced partnerships with businesses that are completely outside of the military and intelligence space.
That's where the company sees value in investors like Spark and CRV.
"We truly believe that there is a huge opportunity for us to build a company that can disrupt the way that people think about cyber operations and how to protect themselves from the different types of attacks we are seeing today," Div said.
With a growing foothold in the intelligence and military contractor space and the potential to play a key role in how startups and larger consumer companies protect data, Cybereason may end up being much more than a "safe bet" for investors.
[illustration by Brad Jonas]