Benefiting from businesses letting employees work remotely because of the pandemic, cloud security startup Netskope has more than doubled its valuation since its previous funding round.
Founded in 2012, the company announced Friday that it had raised $300 million at a $7.5 billion valuation, up from the nearly $3 billion at which investors valued Netskope in February 2020.
Existing investor ICONIQ Growth led the latest round, joined by Lightspeed Venture Partners, Accel, Sequoia Capital Global Equities, Base Partners, Sapphire Ventures, and Geodesic Capital.
“Some of what I would call the more stodgy, large verticals who were stuck in their old ways accelerated and said…‘Wait, we need to transform not in four years, but now,’” Sanjay Beri, cofounder and CEO of Netskope, said about its growth over the past year.
Netskope’s top two customer segments for its products, which offer secure access to apps, data, and the Internet for workforces, are the financial services and health care industries. During the pandemic, Beri recalls having to rapidly move companies with thousands of workers online in just three weeks. And while some industries that use Netskope suffered from the economic fallout of the pandemic, the cybersecurity company’s business grew overall.
Beri declined to disclose revenue or exact growth rates, but he did say that sales grew “well above” 50% over the past year and that Netskope is used by roughly 30 of the Fortune 100.
Netskope’s new funding and valuation comes at a time when investors have been pouring record amounts of money into cybersecurity startups. Venture capital dollars flowing to the space rose to $12.5 billion in the first half of this year, according to CB Insights, exceeding the amount raised in all of 2020. A recent high-profile hacking of meat producer JBS and a separate one of the country’s largest oil pipeline, Colonial Pipeline, have only emphasized the need for more cybersecurity protection for all businesses.
For ICONIQ Capital partner Ben Bernstein, the logic behind the investment is that companies are increasingly moving their operations onto the cloud. The pandemic, meanwhile, has increased remote work, strengthening the need for security and data protection of the sort provided by Netskope.
Still, a rising cybersecurity tide lifts all boats, which raises questions as to how the company plans to compete against rivals such as Zscaler or McAfee, or vie for dollars against businesses with less overlap, but that also focus on digital security like SentinelOne. Bernstein says he believes that there’s room for many players, especially if they have different approaches to cybersecurity. “If you are a chief information security officer, it’s like an onion. You always put in multiple layers of protection,” he says.
Currently unprofitable, Netskope plans to expand quickly with its new money. While the company has made acquisitions in the past, Beri notes that he favors organic growth—though he says he’s open to future acquisitions for talent or tech. The company also plans to hire, to reach a headcount of nearly 1,700 by the end of the year, versus 1,400 today.
“For us, this is grab land, grab market share,” says Beri. “There’s such a big opportunity we’re not going to shortchange ourselves.”
The latest funding, a Series H, means Netskope is running short of letters it can use to denote further private financing rounds. Joking aside, Beri says this is likely his company’s final funding before an initial public offering. When Netskope plans to go public, however, remains unclear. While it seems like a good time for cybersecurity companies to IPO—shares of CrowdStrike are up 131% in the past year while Zscaler stock has increased 86%—Beri appears to be in no hurry.
“I think we can say this will be our last really private round,” says Beri. “The reality is, could we be public now? Yes. But we don’t have a set timeline.”
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