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Vectra AI picks up $130M at a $1.2B valuation for its network approach to threat detection and response

Ingrid Lunden
·4-min read

Cybersecurity nightmares like the SolarWinds hack highlight how malicious hackers continue to exploit vulnerabilities in software and apps to do their dirty work. Today a startup that's built a platform to help organizations protect themselves from this by running threat detection and response at the network level is announcing a big round of funding to continue its growth.

Vectra AI, which provides a cloud-based service that uses artificial intelligence technology to monitor both on-premise and cloud-based networks for intrusions, has closed a round of $130 million at a post-money valuation of $1.2 billion.

The challenge that Vectra is looking to address is that applications -- and the people who use them -- will continue to be weak links in a company's security set-up, not least because malicious hackers are continually finding new ways to piece together small movements within them to build, lay and finally use their traps. While there will continue to be an interesting, and mostly effective, game of cat-and-mouse around those applications, a service that works at the network layer is essential as an alternative line of defense, one that can find those traps before they are used.

"Think about where the cloud is. We are in the wild west," Hitesh Sheth, Vectra's CEO, said in an interview. "The attack surface is so broad and attacks happen at such a rapid rate that the security concerns have never been higher at the enterprise. That is driving a lot of what we are doing."

Sheth said that the funding will be used in two areas. First, to continue expanding its technology to meet the demands of an ever-growing threat landscape -- it also has a team of researchers who work across the business to detect new activity and build algorithms to respond to it. And second, for acquisitions to bring in new technology and potentially more customers.

(Indeed, there has been a proliferation of AI-based cybersecurity startups in recent years, in areas like digital forensics, application security and specific sectors like SMBs, all of which complement the platform that Vectra has built, so you could imagine a number of interesting targets.)

The funding is being led by funds managed by Blackstone Growth, with unnamed existing investors participating (past backers include Accel, Khosla and TCV, among other financial and strategic investors). Vectra today largely focuses on enterprises, highly demanding ones with lots at stake to lose. Blackstone was initially a customer of Vectra's, using the company's flagship Cognito platform, Viral Patel -- the senior MD who led the investment for the firm -- pointed out to me.

The company has built some specific products that have been very prescient in anticipating vulnerabilities in specific applications and services. While it said that sales of its Cognito platform grew 100% last year, Cognito Detect for Microsoft Office 365 (a separate product) sales grew over 700%. Coincidentally, Microsoft's cloud apps have faced a wave of malicious threats. Sheth said that implementing Cognito (or indeed other network security protection) "could have prevented the SolarWinds hack" for those using it.

"Through our experience as a client of Vectra, we’ve been highly impressed by their world-class technology and exceptional team," John Stecher, CTO at Blackstone, said in a statement. "They have exactly the types of tools that technology leaders need to separate the signal from the noise in defending their organizations from increasingly sophisticated cyber threats. We’re excited to back Vectra and Hitesh as a strategic partner in the years ahead supporting their continued growth.”

Looking ahead, Sheth said that endpoint security will not be a focus for the moment because "in cloud there is so much open territory". Instead it partners with the likes of CrowdStrike, SentinelOne, Carbon Black and others.

In terms of what is emerging as a stronger entry point, social media is increasingly coming to the fore, he said. "Social media tends to be an effective vector to get in and will remain to be for some time," he said, with people impersonating others and suggesting conversations over encrypted services like WhatsApp. "The moment you move to encryption and exchange any documents, it's game over."