Israeli industrial cybersecurity company Claroty announced on Thursday the completion of a $140 million Series D funding round. The company didn't reveal the valuation at which it raised the funds, but Calcalist has learned that the round was conducted at a $1 billion company valuation. This was Claroty's first funding round since 2018.
The round was co-led by Bessemer Venture Partners’ Century II fund, which is specifically designed for growth-stage market-leading companies, and 40 North, the related investment arm of privately held global industrial company Standard Industries. Additional strategic investors include LG, and I Squared Capital’s ISQ Global InfraTech Fund. All previous investors, including Team8 and long-time customers and partners Rockwell Automation, Siemens, and Schneider Electric, also participated. The round brings the company’s total funding to $235 million. According to company CEO Yaniv Vardi, the round includes a small secondary sale of shares estimated at several millions of dollars.
Claroty was founded in 2015 by Amir Zilberstein, Benny Porat, and Galina Antova. Nadav Zafrir, co-founder of Team8, is the company's president. Yaniv Vardi was named CEO in 2020.
Industrial cybersecurity companies founded in Israel haven't achieved great success to date, but according to Vardi that was in large part due to bad timing. "Three things happened which changed our market. Most of the Israeli industrial cybersecurity companies were sold several years ago when industrial companies were not yet a target for cyberattacks. But other recent months we have seen a major oil company shut down due to a cyberattack, a massive meat company in JBF having to pay an $11 million ransom, a water infrastructure company in Florida be attacked, as well as a Honda manufacturing factory," Vardi noted. "If these companies that were sold in the past had a little more patience or more money they would have had the ability to grow and become much bigger."
Vardi recognizes that this is the ideal time for his company to accelerate its growth. "We are aiming to build a real market leader and we will be for the industrial sector what Check Point was for firewalls," said Vardi. "We are a different kind of company because we don't just secure industrial endpoints. That is where we began and we are very strong in that sector, but over the past year we have started to provide security for everything within the factory and the industrial site."
The technological changes of recent years have meant that Claroty is now looking to expand into additional verticals in which other Israeli cybersecurity companies the likes of Armis are active in. "I want to expand into new areas and sectors. We are currently in the food and beverage, medicine and auto industries, but I want to expand into transport, managing industrial facilities, the world of government, as well as enter additional regions like Japan. We will take our product to the next level and will protect everything we can connect to," said Vardi.
There has been a clear and distinct shift since 2020 in the frequency and impact of cyberattacks against organizations that underpin the world’s critical infrastructure and supply chains. According to Cybersecurity Ventures, global ransomware damage costs are predicted to exceed $265 billion by 2031, up from $20 billion in 2021.
Claroty said it is expecting 133% year-over-year growth in new annual recurring revenue from the first half of 2020 to the first half 2021. It also said that it registered 110% YoY net new logo growth and 100% customer retention, including Coca-Cola EuroPacific Partners (Australia, Pacific, Indonesia) and IRPC Public Company Limited. The company hired 80 new employees in the Americas, EMEA, and APAC in 2021 and is on track to grow its headcount by nearly 50% by the end of the year. Claroty currently employs 270 people in total, 140 of them in Israel. It plans to reach 300 employees by the end of the year.
“We launched Bessemer’s growth fund to invest specifically in clear market leaders,” said David Cowan, partner at Bessemer Venture Partners. “We are focused on helping the next generation of category-defining companies that have standout product-market fit, scalability, and a strong executive team. Since our first investment in Claroty in 2016, the company has continued to demonstrate that it has the best vision, team, and technology to address the unique challenges in the critical infrastructure security sector.”