With cybercrime projected to reap some $6 trillion in damages by 2021, and businesses likely to invest around $1 trillion over the next five years to try to mitigate that, we’re seeing a rise of startups that are building innovating ways to combat malicious hackers. In the latest development, Darktrace — a cybersecurity firm that uses machine learning to detect and stop attacks — has raised $75 million, giving the startup a post-money valuation of $825 million, on the back of a strong business: the company said it has a total contract value of $200 million, 3,000 global customers and has grown 140 percent in the last year.
The funding will be used to expand the company’s business operations into more markets. Notably, Darktrace also separately (not in its funding release) announced today that it is now in a strategic partnership with Hong Kong-based CITIC Telecom CPC, a telecoms firm serving China and other parts of Asia, “to bring next-generation cyber defense to businesses across Asia Pacific.” We’re asking if CITIC, which owns the strategic partner, has also invested in Darktrace as part of this partnership.
The Series D round of funding brings the total raised by Darktrace to just under $180 million. This latest round was led by Insight Venture Partners, and existing investors Summit Partners, KKR and TenEleven Ventures also participated. Darktrace — which is also backed by Autonomy’s Mike Lynch — was founded in the UK and now is co-based in Cambridge and San Francisco.
IT security has been around for as long as we have even had a concept of IT, but a wave of new threats, such as polymorphic malware that changes profile as it attacks, has rendered a lot of the legacy antivirus and other systems obsolete.
Darktrace is part of the new guard of firms that are built around the concept of using artificial intelligence both to help security specialists identify and stop malicious attacks, as well as act on their own to automatically detect and stop the threats.
Others working in the same area of essentially “rebuilding” a company’s security defenses include Hexadite — which Microsoft acquired for around $100 million last month — which, like Darktrace, works in the area of “remediation” by both identifying and relaying information about attacks to specialists, as well as stopping some itself; Crowdstrike, which raised a large round of funding in May at a billion-dollar valuation; Cylance, also valued at more than $1 billion; Harvest AI, which Amazon quietly acquired last year; and Illumio, a provider of segmented security solutions that raised $125 million earlier this year.
Darktrace’s system is based on an appliance it calls the “Enterprise Immune System” that, as we have noted before, sits on a company’s network and listens to what’s going on. It then alerts IT managers when there is suspicious behavior; or takes immediate action to snuff out or slow down an attack.
That has proven to be an attractive idea to investors, as seen by the hundreds of millions that have been ploughed into this area already. “Insight Venture Partners has a proven record of partnering with tech-focused firms, and its backing of Darktrace is another strong validation of the fundamental and differentiated technology that the Enterprise Immune System represents,” said Nicole Eagan, CEO at Darktrace, in a statement. “It marks another critical milestone for the company as we experience unprecedented growth in the U.S. market and are rapidly expanding across Latin America and Asia Pacific in particular, as organizations are increasingly turning to our AI approach to enhance their resilience to cyber-attackers.”
“In just four years, Darktrace has established itself as a world leader in AI-powered security,” said Jeff Horing, Managing Director at Insight Venture Partners. “Insight is proud to partner with Darktrace to continue to drive its strong growth and superior product market fit.”
It’s interesting to see Darktrace moving into China: the country has been identified numerous times as one of the main countries from which cyberattacks on Western firms have originated. With its machine learning approach, this move could see the company gain new kinds of insights into the larger global threat, subsequently passing on that benefit to other Darktrace users.
“After witnessing the power of Darktrace’s technology first-hand, CITIC Telecom CPC wanted to share the value of this disruptive AI for cyber defense on a large scale,” commented Mr Daniel Kwong, Senior Vice President, Information Technology and Security Services at CITIC Telecom CPC. “As we have seen from the headlines, humans are consistently outpaced by increasingly automated threats, organizations increasingly recognize that traditional defenses focussed on past threats only provide the most essential protection.