Tech’s hottest investment right now is cybersecurity. Technical and boring as it may sound, investors are flocking to businesses claiming to add some semblance of data protection.
The latest example of this is the New York-based digital security company SecurityScorecard, which has raised a $US12.5 million Series A round of funding led by Sequoia Capital. Sequoia partner Michael Goguen has joined the company’s board. Existing investors Boldstart and Evolution Equity Partners also participated in the round. In total, the company has raised $US14.7 million following a seed round from last year.
SecurityScorecard provides a software-as-a-service (SaaS) platform that gives companies insight into how secure their partners and vendors are. The thesis behind the company is that it’s not enough to know that your company is secure; You’ve got to make sure your partners and vendors are also safe.
To do this, SecurityScorecard keeps tabs on other companies’ cybersecurity practices by tracking thousands of security vectors. This includes what hackers are talking about (i.e. is a hacker forum discussing your company), what ways hackers attack companies, which companies have most recently been attacked, how quickly companies react, and what their history with data security are. It aggregates this information onto a platform that gives each company a report card grade. Its customers pay an annual fee based on how many companies they would like to track.
SecurityScorecard’s business capitalises on the uncertainty in today’s digital business landscape. Companies are scrambling to digitize and connect their data, but many are significantly lacking when it comes to how they secure this data. Sony’s embarrassing hack last year served as a wakeup call to many other companies.
This is why Aleksandr Yampolskiy started the company, he told Business Insider. As the former chief security officer at Gilt Group with a heavy cryptology background, Yampolskiy feared his vendors’ practices. Gilt shares its data with many other companies and he wanted a way to make sure they treated it with the utmost care. Many companies, he said, simply “pretend the problem doesn’t exist.” So he teamed up with Sam Kassoumeh — also a former Gilt Group chief security officer — to build SecurityScorecard.
This funding comes at a time when security is hot. Beyond Sequoia, cybersecurity firms of late have been seeing marked investor interest. Take, for example, cybersecurity firms Rapid7, LogRhythm, and Mimecast — all of which plan to go public later this year with valuations exceeding $US1 billion. In short, while the technical nature of the security space isn’t necessarily sexy, companies and investors are finally figuring out how important good practices are.
Yampolskiy has also noticed an uptick in security interest. While his client list is relatively small (“dozens of companies,” he said), the volume of new interest has been growing rapidly, according to Yampolskiy.
What’s also increasing, said the CEO, is demand for security education. This is a heartening sentiment, given that we’re talking about multi-billion dollar companies attempting to secure their precious data.