Endpoint Detection & Response (EDR), Endpoint Protection Platforms (EPP), Endpoint Security
With the IPO market closed, Cybereason must prioritize profitability over growth
Michael Novinson (Michael Novinson) •
June 1, 2022
Late-stage security startup Cybereason has laid off 10% of its employees in response to deteriorating market conditions less than a year after raising $325 million.
“This was an extremely difficult decision,” a Cybereason spokesperson told Information Security Media Group in an email. “As bullish tech market conditions have transformed and the tech IPO market has essentially closed, companies like ours must now exercise tighter financial discipline and prioritize the profitability rather than revenue growth.”
News of the layoffs at the Boston-based endpoint security provider was first reported Wednesday afternoon by Israeli publications Calcalist and globe, who both said about 100 employees had been laid off. Several dozen laid off employees are based in Israel, with the rest working in the United States and Europe. Cybereason declined to comment on the number of those laid off or where they live (see: Lacework announces layoffs 6 months after raising $1.3 billion).
“Going into austerity mode”
Some of the departments affected by the layoffs include corporate communications and the Office of the Chief Security Officer, a source familiar with the matter told ISMG. The layoffs come four months after Bloomberg reported that Cybereason had confidentially filed an initial public offering in the United States that could value the company at more than $5 billion.
“I think they tried too hard in an aggressive growth phase leading up to the IPO, but weren’t ready for the launch window,” the source told ISMG.
A source told ISMG that the company appears to be actively pursuing growth ahead of a potential IPO. But “now the market is moving in the wrong direction, and they have to strap in and wait for another opportunity, so they’re playing defense and going into austerity mode.”
Not a single security company went public in 2022, a far cry from 2021, when KnowBe4, SentinelOne, and ForgeRock all went public with IPOs and Appgate and IronNet went public through acquisition companies at special vocation. These companies have weathered the economic downturn particularly badly, with their stock prices falling 22%, 51%, 24%, 58% and 21%, respectively, over the past six months.
Cybereason employed some 1,500 people in more than 50 countries before the current round of layoffs, Calcalist and Globes reported. Co-founder and CEO Lior Div told Forbes in November that the company then employed 1,100 people and is expected to end 2022 with 2,000 employees, quadrupling Cybereason’s workforce of 500 before the onset of the COVID-19 pandemic in spring 2020.
The company in July closed a $275 million Series F funding round led by former US Treasury Secretary Steve Mnuchin’s private equity firm and landed a $3.3 billion valuation, according to Pitchbook. Then in October, Cybereason extended its Series F with a $50 million investment from Google Cloud, VentureBeat and others reported.
Div told Forbes in November that Cybereason had $120 million in annual recurring revenue and was growing 200% in the United States, which accounted for 50% of the company’s market. Cybereason had 35% of its market share in Japan, Div said at the time. The company has long been supported by Japanese conglomerate SoftBank, which led the company’s financing rounds in 2015, 2017 and 2019.
“Our market traction remains strong as we continue to build a business that matters with long-term goals in mind and plans for a tremendous outcome when the markets – and us – are ready,” the doorkeeper said. -Cybereason’s word to ISMG.
The losses are piling up
Cybereason is the second late-stage security startup to publicly disclose layoffs in as many weeks, with Lacework announcing last week that it has laid off 20% of its employees to bolster its balance sheet. The layoffs came just six months after the San Jose, Calif.-based cloud security provider raised $1.3 billion at an $8.3 billion valuation.
“We have adjusted our plan to increase our cash trail to profitability and significantly strengthened our balance sheet so that we can be more opportunistic in the face of investment opportunities and weather uncertainty in the macro environment,” wrote Lacework co-CEOs David Hatfield and Jay Parikh. email to employees.
Like Cybereason, Lacework was set to go public this year before macroeconomic storm clouds made it a non-startup. Late-stage sellers want to make their money last longer as backers become more careful with their money, angel investor and SentinelOne and CyCognito board member Dan Scheinman told ISMG last month.
“The IPO market tends to be either a feast or a famine. And right now it seems to be more of a famine,” Scheinman told ISMG. “There’s less capital looking for late-stage companies. There’s a lot of pressure on late-stage companies’ valuations and capital.” Across the market, IPOs are down 80% from this point a year ago, Renaissance Capital found last month.
Prior to Lacework, no cybersecurity-related layoffs had generated buzz since March 2021. Forcepoint, Mimecast and McAfee all made layoffs in Q1 2021, while Sophos made layoffs in June 2020 and Symantec cut 240 jobs in September 2019.