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Seattle cybersecurity startup ExtraHop to be acquired by private equity firms in $900M deal

Left to proper: ExtraHop CTO and co-founder Jesse Rothstein; CEO Arif Kareem; Chief Buyer Officer and co-founder Raja Mukerji. (ExtraHop Photograph)

Non-public fairness corporations Bain Capital and Crosspoint Capital will purchase cybersecurity startup ExtraHop for $900 million. It’s one of many largest acquisitions of a Seattle-area tech startup to this point, and comes amid heightened cybersecurity considerations throughout industries.

ExtraHop makes use of machine studying to assist firms forestall, detect, and remove threats on their networks, working in a fast-growing sector of cybersecurity known as “community detection and response.” It has round 1,000 prospects together with The Dwelling Depot, Concur, Seattle Youngsters’s, Ulta Magnificence, and others. The 14-year-old firm — which hinted at an IPO up to now — hit $100 million annual recurring income within the first quarter and expects that metric to develop by 40% this yr.

Cybersecurity has been within the highlight over the previous yr and significantly the previous few months with giant assaults affecting varied entities together with the meat industry, tech giants, federal agencies, and a major gas pipeline. The pandemic additionally offered new hacking alternatives as companies shifted on-line and cyber criminals capitalized on the health and economic distractions.

“Organizations at present face an array of extremely subtle cyberattacks with various motivations that run the gamut from theft of delicate private and enterprise knowledge to illicit revenue,” CEO Arif Kareem mentioned in an announcement. “Attackers have lengthy had the benefit, and we’re on a mission to vary that.”

Kareem mentioned the deal, anticipated to shut this summer time, will speed up development and assist prospects “defend their operations from even essentially the most superior threats.”

Kareem and the corporate’s co-founders Jesse Rothstein and Raja Mukerji will keep on of their respective management roles. ExtraHop employs greater than 500 folks; they can even keep on the firm. ExtraHop will proceed working underneath its personal model.

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Mukerji and Rothstein stay minority buyers within the firm. The co-founders have been each senior architects at Seattle networking and safety big F5 Networks previous to launching ExtraHop in 2007. The corporate started as an IT operations analytics supplier and later added cybersecurity capabilities for each on-premise and cloud environments. Kareem joined ExtraHop in 2016 after govt stints at Tektronix and Fluke Networks.

“We consider that community detection and response is the subsequent main cybersecurity section and that ExtraHop has one of the best enterprise expertise within the area,” David Humphrey, a managing director at Bain Capital Non-public Fairness, mentioned in an announcement.

ExtraHop had raised $61.6 million to this point and its final money infusion was a $41 million Sequence C spherical led by Know-how Crossover Ventures, which later exited its funding. Different buyers embrace Madrona Enterprise Group, which co-led a seed spherical in 2007 and led the Sequence A spherical in 2009; Meritech Capital Companions; Isilon co-founder Sujal Patel; and others. Marc Andreessen and Ben Horowitz of Andreessen Horowitz invested in 2009 as angels.

Madrona Managing Director Matt McIlwain mentioned the acquisition was a “robust return” for the Seattle enterprise capital agency. He first met Mukerji and Rothstein at an occasion in 2007, and lauded the co-founders for taking a long-term method to constructing a enterprise.

“They’d a transparent imaginative and prescient for enterprise wants round efficiency and reliability of their mission-critical functions,” mentioned McIlwain, an ExtraHop board member. “Over time, they found that their capabilities may additionally resolve enterprise safety issues and that has change into the core of their enterprise.”

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ExtraHop is ranked No. 15 on the GeekWire 200 checklist of prime Pacific Northwest startups. It made an undisclosed variety of layoffs in April 2020.

Bain used its $11.eight billion flagship fund to amass ExtraHop; Crosspoint invested out of its $1.three billion fund targeted on cybersecurity, privateness, and infrastructure software program sectors.