The cybersecurity industry's newest unicorn and big funding round headlined is Kiteworks, a company that makes tools to secure email communications, file shares and sensitive data situations, which has raised $456 million from Insight Partners and Sixth Street Growth, an investment that values the company at more than $1 billion.
It's a notable development for the San Mateo-based startup, formerly known as Accellion, which suffered a major data breach in 2021. The incident, which involved legacy services, affected at least 300 organizations, including Morgan Stanley, the University of California, Kroger and Shell.
Today, Kiteworks is thriving: the company has been profitable for the past two years and its tools are used by 100 million end users and over 3,650 businesses and government agencies around the world.
The investment comes at a time when IT breaches continue to plague users and organizations, but the funding environment for startups overall remains tough.
As a result, high-performing cybersecurity companies have emerged as consolidators: Wiz raised $1 billion earlier this year to acquire smaller companies, and Kiteworks has plans to do the same.
Kiteworks said it plans to use some of the funds for acquisitions.
“We embarked on a pretty aggressive M&A strategy about 18 months to two years ago,” Chief Strategy Officer Tim Freestone said in an interview. “This funding will help us continue that strategy over the next four years.”
Kiteworks has acquired four small startups since 2022. The funding will also be used for hiring, research and development and business development, he added.
The cybersecurity industry is known for the rapid and prolific emergence of startups, in part because the threats to be addressed are constantly evolving, creating opportunities for enterprising technologists to pursue. Kiteworks represents another side of cybersecurity.
The company has been privately held for over 20 years and cannot be considered a “startup” in the typical sense.
While there has been a lot of attention in recent years on areas like cloud, network/infrastructure and application security, Kiteworks is focused on how to protect data, specifically sensitive data, whether it’s on-premise, in the cloud or somewhere else entirely, such as a line of information typed into a form on the web.
“We've finally gotten to the data layer as an industry, and it's worked for us,” Freestone said.
One of Kiteworks' unique selling points is its proprietary approach to handling sensitive data as part of what the company calls a Private Content Network (PCN) (not to be confused with PCN, which stands for Process Control Network in information security.) Government agencies, or organizations looking to provide services to government agencies, need to adhere to a strong data protection compliance layer.
Kiteworks claims to be the “only FedRAMP approved security platform” in the US that supports activities such as file sharing, file transfers, and email communications to meet compliance requirements. Some of the company's solutions are ingenious, such as a DRM tool that makes documents look “real” to the recipient but are actually facsimiles, ensuring most data never leaves the sender's firewall.
“This investment strengthens Kiteworks' role in addressing the challenges of managing sensitive data,” said Jonathan Yaron (pictured below), CEO and Chairman of Kiteworks. “We look forward to accelerating our growth and continuing to innovate to meet our customers' evolving needs.”
Insight Partners and Sixth Street Growth's co-investment will come from a mix of primary and secondary shares in the company. The company did not disclose the ratio of primary to secondary shares, but the first tranche of the total amount earmarked for growth capital was $228 million, according to PitchBook data as of early July.
Having committed over $4.5 billion to cybersecurity investments (including Wiz), Insight believes now is the time for Kiteworks to double down on its investment.
“Due to increasing third-party cybersecurity threats and stringent regulatory requirements, Kiteworks faces a significant market opportunity for both organic and inorganic growth,” Eoin Duane, MD at Insight, said in an email to TechCrunch. “Customers value Kiteworks PCN and the existing customer base is experiencing strong growth. And as data security becomes increasingly important, the company is well-positioned to attract new customers.”