Energy management system provider Schneider Electric and telecommunications group SoftBank have co-led a $400m series E round for US-based Claroty, the latest of a flurry of internet-of-things (IoT) and cybersecurity companies raising capital.
Venture capital firm Bessemer Venture Partners and investment firm Standard Investments also co-led the round, which included Istari and Team8.
The corporates were represented by SE Ventures and SoftBank Vision Fund 2 respectively, with Yossi Cohen – who oversees the latter’s Israel investment activities on behalf of SoftBank Investment Advisers (SBIA) – joining the company’s board of directors.
Founded in 2015, Claroty has built an extended IoT (XIoT) – covering industrial IoT (IIoT), internet-of-medical-things (IoMT) and enterprise IoT – cybersecurity software tool designed to help organisations safeguard their IoT operations and operational technology (OT) assets through threat identification, risk mitigation and encrypted remote access.
Claroty’s overall funding now stands at $635m, representing the largest amount raised by an XIoT cybersecurity group, according to Crunchbase data.
Claroty chief executive Yaniv Vardi told Crunchbase News: “We see a lot more excitement from the investor community – both VC and private equity. I would say the level of excitement is five-times or 10-times from what it was a year or two ago.”
OT security gathered investors’ attention between 2018 and 2019 but its deal activities seemingly died out last year until latter half of this year. US President Joe Biden just signed a $1.2 trillion infrastructure bill into law last month, which is one of the largest infrastructure packages in the country’s history intended to help secure national facilities including roads, bridges, airports, waterways and public transit.
Though not backed by corporate investors, IoT and OT security technology developer Armis Security received $300m in private equity funding last month – nine months after it had collected $150m – at a $3.4bn valuation.
Another cybersecurity company, Dragos, closed a $200m series D round at a $1.7bn valuation a month earlier led by industrial group Koch Industries’ Koch Disruptive Technologies subsidiary and backed by investors including corporates Schweitzer Engineering Laboratories, Hewlett Packard Enterprise, Rockwell Automation, Emerson and National Grid (through National Grid Partners).
In addition, IIoT security technology developer Nozomi Networks received $100m in a series D round in August this year which featured Honeywell Ventures and Porsche Digital, respective units of conglomerate Honeywell and carmaker Porsche, and electronics company Keysight Technologies.
Claroty itself had raised $140m in a series D round in June co-led by 40 North, the investment subsidiary of industrial group Standard Industries, and backed by Schneider Electric and fellow corporate investors LG, Rockwell Automation and Siemens.
Vardi believes the reason behind the refreshed interest is the number of attacks on critical infrastructure currently happening in the space. “This market is going crazy right now,” he continued. “It is not [chief information security officers] that are realising this is a problem. It is the board of directors that are realising this is a problem.”
Claroty also disclosed alongside the deal that it has entered into an agreement to acquire Israel-based IoMT security group Medigate for an undisclosed size.
Concerning the company’s cybersecurity system, SBIA’s Cohen said: “Claroty’s technology addresses a high-stakes problem in enabling safe digital transformation, and we are eager to partner with the team in its journey to protect the critical infrastructure that is the foundation of the AI revolution.”
Heriberto Diarte, chief executive of SE Ventures, also stated: “We are pleased to be part of this funding round and continue our partnership with Claroty, who has developed the leading industrial cybersecurity platform to protect and manage OT, IoT and IIoT assets, and is now extending that expertise into healthcare to protect the XIoT.”
