The $100 million raised by Cylance Inc. last week highlights the booming demand for software security needed to thwart malicious cyberattacks in the public and private sectors—and the growing appetite of venture capitalists to fund Orange County-based businesses that are taking on the challenge.
The Irvine-based company attracted several prior investors in its latest round of fundraising, including lead backer Blackstone Tactical Opportunities, which has more than $340 billion in assets under management through its global private equity, real estate, credit, and public debt and equity units.
“They’re seeing a potential for a bigger return,” said Global Chief Information Security Officer Malcolm Harkins, who joined Cylance about a year ago after serving as chief security and privacy officer at Intel Corp., the world’s largest chipmaker. “They want to make money, and if their best opportunity to do that, given the startup community, is to spend more money with us speaks volumes in terms of what we’re doing.”
Indeed, the fast-growing software maker has more than doubled its customer base to over 900 since Harkins arrived, and now serves 20 industries. Customers include Toyota, Gap, Panasonic and Noble Energy.
The company—which declined to discuss revenue and other financial information—will use its latest chunk of cash to boost sales, marketing and engineering programs. Cylance doubled its local employment in the last year to about 210 and has some 400 workers globally, with additional offices in Portland, Ore.; London; Tokyo; and Sydney.
It recently expanded its offerings to the Nordic countries, Canada and Japan.
Its software fuses machine learning, artificial intelligence algorithms, and the cloud to thwart new and evolving threats and cyber attacks before they hit servers, desktops and virtual desktops.
Benchmark
The $100 million Series D round, which is among the highest in OC tech history, brings the company’s fundraising total to $177 million since its inception in 2012.
The new round matches a recent benchmark on funding for tech firms here, a level first reached last July by Irvine-based security software maker CrowdStrike Inc. in a Series C round led by Google Capital.
CrowdStrike, which was established in 2011 by former executives at McAfee Inc. and Networks in Motion Inc., has seen revenue zoom past $50 million with a roster of hundreds of government agencies and Fortune 500 customers that pay a monthly subscription for software services delivered through the cloud. The software is designed to detect, prevent and respond to sophisticated security threats and attacks, as well as provide monitoring, cyber intelligence services, and Big Data analytics.
The companies also have more in common than their funding rounds, sector and headquarters location.
Cylance co-founder Stuart McClure and Crowdstrike founder George Kurtz in 1999 established Mission Viejo-based Foundstone Inc. The software maker, which specialized in detecting and managing software vulnerabilities, was sold five years later to McAfee in Santa Clara for $86 million in cash.
The duo in 1983 penned a book on cybersecurity, “Hacking Exposed,” with industry veteran Joel Scambray. The book’s seventh edition was published in 2012.
Hot Stuff
Cybersecurity is one of the hottest sectors in technology as high-profile breaches and attacks continue to plague corporations and governments around the world.
Cybercrime and cyber-espionage cost the global economy $445 billion annually in theft and hacking disruptions, according to the Center for Strategic and International Studies in Washington, D.C.
A number of other emerging and established players in the industry are based in OC, particularly in Irvine, home to SecureAuth Corp., Susteen Inc. and US Mobile.
SecureAuth, which raised $10 million in January, used part of the proceeds to establish an office in the Dulles Technology Corridor in Reston, Va., to draw top Washington, D.C., talent in ID security and development.
Its subscription software, which verifies the identity of employees allowed access to physical and virtual networks and links users to a particular device on the network, has received strong demand from the law enforcement and medical sectors.
Susteen, which is involved in some of the nation’s top forensic investigations, is testing a robotic arm to unlock the most common mobile phones used in crimes. The company contends it can break into any throwaway phone with a four-digit password in 17 hours and can unlock a six-digit pin in a few days.
Startup US Mobile, which collaborated with the National Security Agency for years to develop a private mobile network, launched an iPhone and iPad app in late February for the service.
The developments come as the University of California-Irvine aims to establish a cybersecurity research institute that will become the first of its kind in the state with a national scope and profile.
The Business Journal last month reported that the Department of Homeland Security has taken part in early discussions about developing the institute, which is seeking partnerships with the technology, finance, communications, medical, insurance, law enforcement and real estate sectors, among others.
