Cybersecurity's Money Men

Transcription

1 Amanda Jones About PR O F I L E S Cybersecurity's Money Men By Katie Benner Jan. 21, :01 AM PST 1/14

2 Mounting data and national security threats have transformed cybersecurity investing from a relative backwater into a robust field in which public offerings can provide a handsome return. Companies that predict when and where hackers will attack and ward them off including FireEye, Barracuda Networks, AVG, Proofpoint, Qualys and Palo Alto Networks went public within the last two years. There were 62 cybersecurity acquisitions or IPOs in 2013 and 99 in 2012, according to research firm CB Insights. But investing in cybersecurity companies, whose success can depend heavily on landing key government or corporate contracts, isn t for the uninitiated. The Information identified the grizzled veterans who have watched companies privacy and security needs grow over the last several years as attacks have become increasingly sophisticated and more publicized. A recent spate of data security breaches at retailers like Target and Neiman Marcus rattled consumers. The role of technology in national security is also being hotly debated publicly amid revelations of controversial National Security Agency data-collection programs. These investors have become go-to players for entrepreneurs on account of two traits. Many were operators of security companies themselves and have built ties with software giants like Cisco Systems, Intel and the financial services firms that need cutting-edge security. They have also forged relationships with the government agencies that are responsible for keeping the country safe, including the Department of Defense, the National Security Agency, the Department of Homeland Security and the Central Intelligence Agency. We interviewed entrepreneurs, software executives and sources with close ties to Washington to identify Silicon Valley s most influential cybersecurity investors. Most of them gave us their take on the industry and talked about investments and exits of note. A forthcoming second installment will look at prominent investors in Washington, angel investors and some up-and-comers. 2/14

3 Ted Schlein General partner, Kleiner Perkins Caufield & Byers Age: 49 Recent security investments: Shape Security, which makes software to defend against automated attacks; Ionic Security, a cloud and mobility security platform; Endgame, data analytics to anticipate attacks; Synack, crowdsourced security. Big exits: Mandiant, a cyber forensics firm, was sold to FireEye last December for more than $1 billion. 41st Parameter, a fraud detection company, was sold to Experian for $324 million last October. Percent of the fund currently in security, by value: Undisclosed Key Connections: Mr. Schlein serves on the board of In-Q-Tel, the venture capital arm of the Central Intelligence Agency. He s also on a board with Ex-National Security Agency director Lieutenant General Kenneth A. Minihan. Background: Mr. Schlein is regarded as one of Silicon Valley s most-influential cybersecurity investors. He began his career at Symantec in 1986, where he released the first commercial antivirus software. A decade later he joined Kleiner Perkins, where his first investment was Internet Security Systems, later acquired by IBM. He incubated a company called Fortify Software that was sold to Hewlett- Packard for $300 million in Boards: AlienVault, LifeLock, 41st Parameter, Synack and Mandiant. 3/14

4 Looking ahead: Mr. Schlein has watched companies get more proactive about cybersecurity. You re seeing the mental shift away from prevention to the idea that now everyone will be breached, he says. Breach monitoring and remediation software will be the new anti-virus. David Cowan Partner, Bessemer Venture Partners Age: 48 Recent security investments: IID, threat detection; ThreatTrack, targeted attack protection; Mojave Networks, cloud-based mobile security. Big exits: Qualys, a cloud security company that went public in 2012 and has a $919 million market capitalization, and LifeLock, an identity theft company that went public in 2012 and has a $1.7 billion market cap. Percent of the fund currently in security deals: 13% Key connections: Sits on boards with Tom Ridge, former secretary of Homeland Security, and Lt. General David Deptula, former deputy chief of staff for intelligence, surveillance and reconnaissance with the U.S. Air Force. Background: In 1995, Mr. Cowan co-founded Verisign, a spinout of security giant RSA. He tends to be an early investor and has put money to work in security play Tumbleweed, which went public in 1999 and later acquired two other Bessemer portfolio companies. 4/14

5 Boards: Postini, Cyota, Nominum, Endgame and Defense.net. Looking ahead: Mr. Cowan says he s worried that cybersecurity investing is getting more crowded and that there are talent shortages. I want to make investments in a brand new space at an early stage where there s less competition, he says. One idea he finds interesting is real-time intelligence sharing, where companies and governments pay to be part of an information exchange. Asheem Chandna Partner, Greylock Partners Age: 49 Recent security investments: SkyHigh Networks, cloud security and encryption. Big exits: Palo Alto Networks, a subscription security platform that includes advanced threat protection, went public in 2012 and now has a $4.6 billion market capitalization. Percent of the fund currently in security deals: 25% of enterprise deals Key connections: Shlomo Kramer, co-founder of Check Point Software and a prominent angel investor in security software; Alan Paller, founder of SANS Institute, a cybersecurity training school. Background: Mr. Chandna has a long operations résumé that includes stints at 5/14

6 Background: Mr. Chandna has a long operations résumé that includes stints at AT&T Bell Labs and Compuware. But it s his six-plus years at Check Point Software that have paid obvious career dividends. At Greylock he incubated Palo Alto Networks with his former colleague Nir Zuk, Check Point s co-founder and CTO. Boards: Palo Alto Networks Looking ahead: VCs aren t the only investors getting into the security space, according to Mr. Chandna. Lots of large corporations including General Electric, J.P. Morgan and Goldman Sachs are interested in investing in private companies, he says. Promod Haque Senior managing partner, Norwest Venture Partners Age: 65 Recent security investments: Apprity, cloud security Big exits: FireEye, which went public last September and has a $8.9 billion market capitalization, and 41st Parameter. Percent of the fund currently in security deals: 15% Key connections: He sits on boards with Robert Lentz, former chief information security officer at the Department of Defense, and Enrique Salem, ex-ceo of Symantec. Background: In 2005, Mr. Haque became one of the earliest investors in the anti- 6/14

7 Background: In 2005, Mr. Haque became one of the earliest investors in the antimalware company FireEye alongside Gaurav Garg, formerly of Sequoia Capital. That same year he made a first round investment in 41st Parameter. Norwest owns about 20 million shares of FireEye that are worth about $1.3 billion. Boards: Virtela, FireEye Looking ahead: Mr. Haque believes startups have an opportunity to displace the currently sprawled-out network of traditional security software vendors. Full platform security vendors are emerging, like FireEye and Palo Alto Networks, and platform will be the successful business models going forward. Michael Biggee and Alberto Yepez Managing directors, Trident Capital Ages: Mr. Biggee, 37; Mr. Yepez, 54 Recent investments: AlienVault, all-in-one security solutions; Mocana, mobile app security. Big exits: Solera, a security analytics and forensics company that was sold to Blue Coat Systems last May, and Qualys. Percent of the current fund in security deals: More than 25% Key connections: They serve on boards with General Peter Pace, former chairman of the Joint Chiefs of Staff, and Howard Schmidt, former White House cyber coordinator. 7/14

8 Background: Mr. Biggee, a former Merrill Lynch banker, joined in 2005 to help Trident expand in security investing. The firm has made nine security investments and had six exits since he joined. He s on the board of Voltage Security and was on the board of Arxan Technologies. Mr. Yepez spent 10 years at Apple, where his roles included manager of the Mac technology group and the enterprise systems division. He spent two and a half years building Oracle s security and identity business and was an angel investor in Securent, a data security company acquired by Cisco. He joined Trident in Boards: AlienVault, Mocana and Neohapsis. Looking ahead: The increased importance placed on IT security means that businesses are hunting for more board directors with security experience. Just as companies began to seek out CFOs that understood Sarbanes-Oxley, global corporations are going to add cybersecurity expertise at the board level to deal with threats and liability, Mr. Yepez says. Gaurav Garg Co-founder and managing director, Wing Venture Partners Age: 48 Recent security investments: Apprity, Shape Security and Synack. Big exits: FireEye. Percent of the fund currently in security deals: 35% 8/14

9 Key connections: He sits on boards with Sumit Agarwal, a former deputy assistant secretary at the Department of Defense, and former NSA official Robert Lentz. Background: Among his earliest cybersecurity investments was NetScaler in 2003 while he worked for Sequoia Capital. Citrix Systems bought the company for $325 million in Mr. Garg championed Sequoia s investment in FireEye in In 2008, he led Sequoia s investment in MobileIron, which provides mobile management and security solutions. Boards: MobileIron, Shape Security. Looking ahead: Mr. Garg says that the evolution in security systems will drive large amounts of corporate spending. "This decade, we'll continue to witness the breakneck movement of security infrastructure from behind the walls of the enterprise, he says. In lockstep, massive budgets will shift." Bob Ackerman Managing director and founder, Allegis Capital Age: 57 Recent security investments: Bracket Computing, cloud security; Shape Security and Synack. Big exit: IronPort Systems, which protects organizations against spam, viruses and malware. Cisco acquired it in 2007 for $830 million. Percent of the fund currently in security deals: 25% 9/14

10 Key connections: Was an advisor with the Defense Department s Defense Venture Catalyst Initiative. Venture capitalists serve two-year stints with the program and identify companies and technology that could be useful to the agency. Background: Mr. Ackerman has long put money to work in privacy and security. His first foray into the space was in 1999 with a seed investment in the privacy software company Privada. In 2006 he worked with Advanced Technology Ventures to fund Apprion, a provider of secure wireless communications infrastructure. He was also an early investor in and director of Solera Networks, which was sold to Blue Coat Systems last May. Boards: Apprion Looking ahead: CPU speeds, network speeds and storage availability have long placed limits on what we can and can t do in technology, Mr. Ackerman says. Cybersecurity is now the fourth determinant. Venky Ganesan Managing director, Menlo Ventures Age: 40 Recent security investments: BitSight, data analysis to identify and quantify security risk. Big exits: Palo Alto Networks. Percent of the fund currently in security deals: 15% 10/14

11 Key connections: As a member of the National Venture Capital Association s board, he works with venture industry lobbyists and regulators. Background: Before joining Menlo Ventures last year, Mr. Ganesan invested in security-related companies during a 14-year stint at Globespan Capital Partners. There he invested in Palo Alto Networks and he worked on a 2004 investment in Q1 Labs, which was acquired by International Business Machines. Before he was an investor, Mr. Ganesan co-founded and sold Trigo, a software company for manufacturers and distributors, and forged deep ties with strategic acquirers. IBM, Oracle, NetApp, Google and Cisco have all bought or invested in his portfolio companies. Looking ahead: He thinks companies will face pressure to beef up on cybersecurity because consumers and corporations won t want to do business with them if they are vulnerable to attacks. Jim Goetz General partner, Sequoia Capital Age: 48 Recent security investments: SkyHigh Networks. Big exits: Barracuda Networks, a cloud security company that went public last November and has a $1.8 billion market cap, and Palo Alto Networks. Percent of the fund currently in security, by value: 10% 11/14

12 Key Connections: Mr. Goetz is a board member alongside William Jenkins, an ex- EMC executive, and Mark McLaughlin, the former CEO of Verisign who served on President Barack Obama s National Security Telecommunications Advisory Committee. Background: Sequoia has been active in the cybersecurity space for decades, making investments in hot names like Bit9 and Blue Coat. Since joining in 2004, Mr. Goetz was involved in important deals including Palo Alto Networks and Barracuda Networks. Boards: Palo Alto Networks and Barracuda Networks. Looking ahead: The threat that Mr. Goetz finds most alarming is the proliferation of government-sponsored cyber attacks, and he s looking at next-generation firewalls that can defend against increasingly sophisticated offensives. Venky Ganesan works at Menlo Ventures. An earlier version of this story incorrectly said that he works at Menlo Venture Capital. RECENT ARTICLES 12/14

13 PR O F I L E S Cybersecurity's Money Men By Katie Benner Jan. 21, 2014 In Washington, Anarchist Bitcoin Puts on a Tie By Eric P. Newcomer Jan. 20, 2014 B Y T H E N UMB E R S Software Engineers: The Scorecard By Eric P. Newcomer Jan. 17, /14

14 The Information is a subscription publication for professionals who need the inside scoop on technology news and trends. We focus on the stories that drive conversations and help our subscribers get ahead. Terms, Privacy, Payment Policy 14/14