Mark up another unicorn and large funding round for the cybersecurity industry: Kiteworks, a company that builds tools to secure email communications, file sharing, and other situations where people are working with sensitive or proprietary data outside their firewalls, has raised $456 million from Insight Partners and Sixth Street Growth. The investment values the company at over $1 billion.
It’s a notable development for San Mateo-based Kiteworks, which was formerly known as Accellion and the subject of a major data breach back in 2021. That incident, related to legacy services, impacted at least 300 organizations, including Morgan Stanley, the University of California, Kroger and Shell.
Fast forward to today, and Kiteworks — also the name of the company’s flagship product — is going strong. It is profitable, and has been for the past two years. And its tools cover services for 100 million end users and more than 3,650 global enterprises and government agencies.
This cash injection is coming at a time when IT breaches continue to plague users and organizations — yet the funding environment overall for startups remains challenging.
That has led to cybersecurity companies that are performing well shaping up as consolidators. Wiz earlier this year raised $1 billion to scoop up smaller players, and that is the case here with Kiteworks, too.
Kiteworks said it will be using the money in part to make acquisitions.
“We have a pretty aggressive M&A strategy that we started about a year and a half ago to two years ago,” chief strategy officer Tim Freestone said in an interview. “This will help fund the continuation of that strategy into the next four years.” Since 2022, Kiteworks has acquired four smaller enterprise startups. It will also be using funds for hiring, R&D and business development, he added.
The cybersecurity industry has been marked by a very rapid, prolific profusion of startups — partly because the threats that are being addressed constantly evolve, and so enterprising technologists want to pursue those opportunities. Arguably, Kiteworks represents the other side of the cybersecurity story.
The company has been around as a privately-held operation for more than 20 years, making it not-quite a “startup” in the classic sense.
And while a lot of the attention in recent years has been around areas like cloud, network/infrastructure, and application security, Kiteworks’ focus has been on the area of data, and specifically how to secure sensitive data, regardless of whether it is on-premises, in a cloud, or something else entirely, like a line of information entered in a form on the web.
“We’re finally at the data layer as an industry, and so that’s helped us,” said Freestone.
One of Kiteworks’ unique selling points has been its specific approach to handling sensitive data as part of what it calls a private content network, or PCN (not to be confused with the other PCN in infosecurity, which stands for process control network). For government organisations, or those who want to become suppliers to those organizations, there is a strong layer of data protection compliance that they need to go through to be able to work with them.
Kiteworks claims that currently it is the “only security platform authorized by FedRAMP” in the U.S. providing support activities like file sharing, file transfer, and email communications to meet those compliance requirements. Some of its solutions are creative: a DRM tool that makes a document appear like the “real” one to a recipient to work with it but is in fact a facsimile ensures that the most data never leaves the firewall of the sender.
“This investment reinforces Kiteworks’ role in tackling the challenge of managing sensitive data,” said Jonathan Yaron, CEO and chairman of Kiteworks (pictured below). “We’re eager to accelerate our growth and continue innovating to meet our customers’ evolving needs.”
Insight Partners and Sixth Street Growth’s co-investment is coming as a mix of primary and secondary shares in the company. The company is not disclosing the proportions of primary to secondary, but PitchBook data from early July notes that the first tranche of the total sum, designated as growth capital, was $228 million.
Insight, which has put more than $4.5 billion into cybersecurity investments (including backing Wiz), believes now is the moment for Kiteworks to double down.
“With the rise in third-party cybersecurity threats and stringent regulatory requirements, Kiteworks has a large market opportunity in front of them for both organic and inorganic growth,” said Eoin Duane, MD for Insight, in an email to TechCrunch. “Customers love the Kiteworks PCN—there’s strong growth within the existing customer base, and as data security continues to become more important, the company is well-positioned to attract new customers.”