“There’s a lot of money to be made, and the new tools are in high demand,” says Stephen Elliot, VP of the IT infrastructure and cloud practice with IDC Research. “Investors are looking at traditional security markets and asking how to make it better, especially with the new cloud-based technologies emerging.”
Many new network performance monitoring companies are receiving high valuations because their models are cloud-based and the companies are trying to solve critical issues, says Elliot. “I can’t remember the last time we have done a CIO survey and security hasn’t been in the top five most important areas.”
From a business perspective, entrepreneurs don’t have the luxury of attempting to build a security or monitoring company slowly, because this segment must evolve quickly, says Rob Markovich, chief marketing officer of startup Wavefront. While funding is essential to grow, the key is being able to attract investors that can also offer experience, he says.
“The top-tier firms are very consistently going to get the best access to the best deals, because they can use their network, experience, and connections help guide these deals and are able to get a sense of how big an opportunity is,” says Elliot.
With these latest investment trends in mind, here are some of the biggest rounds of funding this year among the companies that we cover.
Wavefront: $52M Series B
Palo Alto-based monitoring company Wavefront raised $52 million led by prior investors Sequoia Capital and Sutter Hill Ventures, and new investor Tenya Capital.
The company originally anticipated only securing $25 million, but executives attribute the higher amount to Wavefront’s already established customer -base that uses its software-as-a-service (SaaS) product.
Wavefront plans to use the money to add more employees, make small acquisitions, and create its own cash flow. It expects this round to last through 2019.
Big Switch $48.5M Series C
Big Switch Networks kicked off the year with an impressive round that brings its total funding to $94 million. The Series C was led by early investor Morgenthaler Ventures, with Gary Morgenthaler joining Big Switch’s board of directors. He is joined by NetApp CEO Dan Warmenhoven.
This large of an investment put the pressure on Big Switch, but the company is building a track record. In 2015, the company experienced 300 percent growth year-over-year. The company has since invested heavily in its Big Cloud Fabric and Big Monitoring Fabric, which has become its bread and butter.
vArmour $41M Series D
In May, security startup vArmour announced funding funding led by Telstra, Redline Capital, and other unnamed investors, bringing the company’s amount raised to $83 million.
The company’s Distributed Security System (DSS) is intended to secure data centers. However, this high valuation happened after it picked up big-name customers like Cisco and Hewlett Packard Enterprise (HPE).
Cisco is using DDS for its Application-Centric Infrastructure (ACI). In ACI, endpoints that would fall under the same policy rules are grouped together. vArmour can provide a view into an endpoint group, acting as an added service to Cisco’s ACI.
Skyport $30M Series C
In March, security startup Skyport raised money from sources including Google Ventures and Cisco Investments, in addition to prior investors like Intel Capital.
Skyport sells a server that physically isolates workloads from the rest of the network, and it is sold as a service. The company plans to extend its sales beyond the U.S. as well as develop a smaller version of its server intended for branch offices.
HashiCorp $24M Series B
In September, open source software provider HashiCorp scored a $24 million Series B, bringing the company’s total funding to $34 million. The round was led by GVV Capital, Mayfield, True Ventures, and new investor Redpoint.
Like many other highly funded companies from this year, HashiCorp wants to expand on security — in this case, its DevOps security system, Vault Enterprise. It builds on the company’s open source security tool Vault, and is meant to give security teams the ability to enforce policy management across distributed infrastructure.
Kentik $23M Series B
In August, network monitoring company Kentik Technology announced funding led by Third Point Ventures in addition to prior investors August Capital, Data Collective, First Round Capital, and Engineering Capital. New investors also included Glynn Capital and David Ulevitch.
Kentik said it will use the funding to increase sales of its SaaS-based network traffic and visibility platform, as well as increase its customer base. The platform, called Kentik Detect, is designed to ingest big data in real-time and allows users to run queries and receive visualizations on complex networks.
Since it launched its SaaS platform more than a year ago, it has picked up some big-name customers such as Box, Yelp, Pandora, and Neustar.
Bay Dynamics $23M Series B
Founded by security analytics experts Feris Rifai and Ryan Stole, Bay Dynamics combines business’ own security systems with an analytics platform. Its Risk Fabric delivers metrics to help users identify their top threats and figure out how to mitigate them. It also helps users determine where the network is most vulnerable.
In February, the company launched its threat alliance partner program, which brings together industry professionals to address the challenges of insider security threats. Partners include Hewlett Packard Enterprise (HPE), Symantec, Microsoft, CA Technologies, and FireEye.