Cloud security start-up Skyhigh Networks raises $40m

Demand soars as companies worry about cyber attacks

Skyhigh Networks, a cloud security start-up, has raised funding from and venture capitalists, as companies worry that employee use of cloud services such as Dropbox and Google Drive could put them at risk of a cyber attack.

Venture capital companies Greylock Partners and Sequoia Capital, both existing investors, led the $40m fundraising round, which will help the two-year-old company expand internationally.

Sales have grown fivefold in the past year as Skyhigh’s more than 200 customers, including big banks and insurance companies, look for ways to secure company data they no longer control.

Rajiv Gupta, Skyhigh founder and chief executive, said many companies did not even know how many cloud applications their employees were using. He said a chief information security officer at a large bank told Skyhigh that his highly regulated workforce only used 42 applications, but Skyhigh had found more than 1,000 in use.

Cloud computing came under scrutiny after Edward Snowden, a former US intelligence contractor, revealed the US National Security Agency had been tapping into services provided by big internet companies. US technology groups that offer cloud services, including Cisco, say last year’s revelations damaged the growth of the sector.

But Mr Gupta said most potential customers of cloud providers, which include investors, had other worries.

“In general, [in the US] they are more concerned about insider threats, hackers and third-party nation-states than the US government looking into their bank accounts, the NSA looking into their affairs,” he said.

In Europe, companies were also worried about the potential fines they could face if Brussels passed a more comprehensive data privacy act, he said.

Asheem Chandna, a partner at Greylock, said venture capitalists were becoming more interested in cyber security as boards woke up to the potential risks their company could face from cyber criminals. Early stage funding for the sector soared by almost 60 per cent last year to $244m worldwide, according to data from PrivCo, the research firm.

“There’s a strong investment climate right now for cyber security companies. Security has always been a top priority, but at this point in time, particularly for large companies, the security budget is growing even if the IT budget is flat or declining,” he said. “I think it is driven by an increasing sophistication of attacks, targeted attacks and cloud and mobility further complicating the situation.”

Mr Chandna pointed to the resignation of Gregg Steinhafel, Target’s chief executive, as a seminal moment for executives. Mr Steinhafel stepped down following a security breach at the US retailer, reflecting how companies must be better prepared for the risks and consequences of cyber attacks.

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