Posted on Thursday, Apr 7th 2016
According to Gartner, the global spending on information security was estimated to grow 5% in 2015 to $75.4 billion. The increase in spending was driven by government initiatives, increased legislation, and high-profile data breaches. Campbell, California-based ForeScout Technologies is a rising star in the industry and a recent entrant to the Billion Dollar Unicorn Club.
ForeScout was founded in 2000 by Israeli entrepreneurs Oded Comay, Doron Shikmoni, Hezy Yeshurun, and Dror Comay. It offers Global 2000 enterprises and government organizations with access to a unique platform that allows them to see devices, including non-traditional devices such as Internet of Things (IoT) devices and Bring Your Own Device (BYOD) endpoints, when they connect to the network.
Its proprietary ForeScout CounterACT platform allows the organizations to control these devices and manage information sharing and operation among disparate security tools to accelerate incident response. It continuously scans the network and monitors the activity of every device and instead of just flagging violations and alerting the IT team, CounterACT allows organizations to automate and enforce a comprehensive range of policy-based controls for network access, endpoint compliance, and mobile device security. Unlike traditional security solutions, CounterACT does not require any software installation or previous device knowledge to enforce security. It is able to integrate with other network, security, mobility, and IT management products to ensure that security is not delivered in silos and to automate workflows and enable cost savings. Its product has helped it become the market leader in the field of access control as per Gartner.
ForeScout does not disclose detailed financials. Earlier this year, it did reveal that it has seen growth rates of more than 50% annually since 2012 and earned $125 million in revenues in fiscal 2015. It is not profitable, but is estimated to be cash flow neutral as of 2015. As of January 2016, it had over 2,000 customers spread across 60 countries. ForeScout is confident of delivering similar growth rates for the next few years due to the increasing instances of high-profile data breaches at retailers, banks, and media companies. Additionally, Gartner estimates that by 2020, 60% of information security budgets of companies globally will be allocated to breach detection and response – a trend that will favor ForeScout immensely.
It has been venture funded so far with $121.6 million raised from investors including Wellington Management, Accel, Amadeus Capital Partners, Aspect Ventures, Cross Creek Advisors, Founders Circle Capital, ITOCHU Corporation, Meritech Capital Partners, and Pitango Venture Capital. Its last round was held in January this year when it raised $76 million in a round led by Wellington Management. ForeScout was valued at $1 billion in the late stage funding. As a smart move, it made sure that it raised financing at friendlier terms to provide for room to grow valuation when it goes public. According to its management,
“We don’t want to be one of those companies that raises at a valuation now that’s eye-popping on the private market and then have to go public at half the price.”
It has also commented that it has no plans of going public soon as it is skeptical of the volatile public market.
For comparison, FireEye went public in 2013. It currently operates at quarterly revenues of $147 million and a valuation of $7 billion. Then there is Palo Alto Networks which ended last year with revenues of $928 million and is trading at a valuation of $13 billion. ForeScout will still need to worry about bigger players like Cisco which continue to add more functionality into existing equipment.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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