IT Security Sector - William Blair...William Blair & Company IT Security Sector – Q1 2015 Update...

Q1 2015 UpdateJanuary 2015

IT Security SectorOverview of Market Activity in the IT Security Sector

William Blair’s investment banking group combines signi icant transaction experience, rich industry knowledge, and deep relationships to deliver successful advisory and inancing solutions to our global base of corporate clients. We serve both publicly traded

and privately held companies, executing mergers and acquisitions, growth inancing, inancial restructuring, and general advisory projects. This comprehensive suite of

services allows us to be a long-term partner to our clients as they grow and evolve. From 2010-2014, the investment banking group completed more than 330 merger-and-acquisition transactions worth $73 billion in value, involving parties in 36 countries and ive continents, was an underwriter on more than 20% of all U.S. initial public offerings,

and raised nearly $100 billion in public and private inancing.About William Blair Investment Banking

William Blair & Company

IT Security Sector – Q1 2015 Update Executive Summary 1

Executive Summary

Private Capital Surges in IT Security

Fueled by powerful industry tailwinds, private capital is flowing rapidly into IT security. But will the industry’s compelling growth dynamics be enough to deliver attractive returns for this recent surge in private capital?

IT security breaches and leaks are ever-present in daily news headlines, highlighting the compelling growth dynamic for investors. Whether it’s Target losing approximately 12% of its market value in the six weeks following its December 2013 security breach or Sony Pictures Entertainment delaying the release of The Interview and having confidential e-mails from high-ranking executives spread over the Internet after being hacked in November 2014, the costs of cyber-attacks—from both a financial and brand perspective—are rapidly escalating as hackers become increasingly sophisticated and organized.

As the impact and sophistication of these attacks continue on a frightening trajectory, corporations’ eyes—and checkbooks—are wide open when it comes to cybersecurity. Companies no longer view cybersecurity as simply a cost of doing business. It is now viewed as a major strategic threat, and IT professionals have an important seat at the table.

When you combine this secular growth story with record amounts of private capital ready for deployment and lackluster growth prospects across many other aspects of the technology industry, it creates a landscape where capital has seemed to flow downhill into IT security, particularly in 2014. These surging inflows, however, highlight the need for sustained positive market dynamics to deliver necessary and expected returns for the recent surge of investment.

New Entrants Driving Increased Private Investment The surge in private capital activity in IT security in 2014 was significant in terms of not only volume, but also the expanding base of investors targeting the sector.

Early-stage venture capital, late-stage venture capital, private equity growth funds, and buyout funds all saw significant increases in the number of IT security transactions in 2014. Approximately $1.9 billion of venture capital alone was invested in IT security companies last year, a 41% increase from 2013, according to PitchBook. Compared with 2010, venture capital investment in IT security has increased at a 25% compound annual rate over the last four years.

Much of this activity is coming from crossover funds and corporate venture arms, two increasingly significant investors in the space. Crossover investors, funds that predominantly invest in public market securities, drove much of the surge in late-stage venture investment, which increased 64% from 2013 to 2014. In September, Veracode raised $40 million from a group of investors led by Wellington Management, and in August Lookout raised $150 million from a group that included T. Rowe Price, Wellington, Goldman Sachs, and other crossover funds. These are just two examples of what has become a common theme in IT security.

We have also seen increased corporate venture arm investment in IT security by strategics from across the technology ecosystem. In addition to the usual suspects (Google, SAP, Cisco, Intel, Samsung, Juniper, et al.), several telecommunications firms made significant private investments in IT security companies in 2014, including SingTel, Sprint/SoftBank, Telstra, and NTT docomo. In all, approximately 25% of all private capital transactions in the IT security space in 2014 included a strategic investor.

Venture Capital Investment in IT Security

Transaction Value ($ millions)

Source: PitchBook; only includes transactions with disclosed values

Venture capital investment in IT security has increased at a compound annual rate of 25% since 2010. Much of this growth has been fueled by increased late-stage investments from crossover funds.

Number of Private Capital IT Security Transactions

Source: PitchBook

Across the private capital fundraising cycle, IT security has seen increased activity since 2010. This increased activity, however, raises the question of whether IPO and M&A markets will be able to accommodate the increased number of emerging IT security companies that will be looking for exits over the next five years.

$0

$500

$1,000

$1,500

$2,000

2010 2011 2012 2013 2014

Seed Round / Early Stage VC Later Stage VC

010203040506070

2010 2011 2012 2013 2014Buyout/LBO Early Stage VCLater Stage VC PE Growth/ExpansionSeed Round


IT Security Sector – Q1 2015 Update 2 Executive Summary

The Current Exit Landscape Given the deep and broad private capital activity in IT security, 2014 was clearly a great time to be an emerging company raising capital. The substantial amount of capital invested across the entire spectrum of investment stage will put increased emphasis and scrutiny on investor returns and thus exit opportunities in the second half of the decade.

While the secular growth tailwinds in IT security show absolutely no signs of abating, the sheer volume of capital that will be looking for exits over the next five years raises legitimate concerns. It remains to be seen whether IPO markets and the corporate acquisition appetite can accommodate the amount of capital that is coming through the pipeline.

IPO markets have been extremely accommodative to IT security companies over the past several years, as shown by the fact that 13 of the last 20 IT infrastructure companies to go public have been security-related. The so-called “IPO window” has been open for approximately four years, but it remains to be seen if the increased market volatility, current earnings season, and plummeting energy prices will impact the new issue market in 2015. Recent disruptions, such as geopolitical conflicts and the U.S. debt downgrade, only temporarily halted the new issue market.

Strategic acquirers will certainly absorb a large portion of the supply of emerging IT security companies. We expect a continued wave of consolidation in the space, driven largely by out-of-segment consolidators as well as new IT security consolidators. In addition, traditional private equity buy-outs will continue to play a meaningful role in providing sound exit opportunities for their earlier-stage brethren. Notable IT security-related buyouts in 2014 included Blackstone’s acquisition of Accuvant, and subsequently its pending merger with FishNet Security, as well as Veritas Capital’s acquisition of BeyondTrust.

In next quarter’s report, we will examine the recent exit environment in IT security. We will also look at the factors that will determine whether we will see a supply-and-demand imbalance over the next three to five years. In the meantime, we encourage you to contact us with your questions about the capital-raising and deal-making landscape in IT security.

William Blair IT Security Team

Dan Daul, managing director and co-head of IT security, joined the investment banking group of William Blair in 2005. While at William Blair and in his prior position at Robert W. Baird & Company, Dan focused on the investment banking needs of IT security, financial technology, and transaction-processing companies. Dan has been involved in more than 60 financing and M&A transactions aggregating more than $5.0 billion in transaction value. Dan received his bachelor’s degree from the University of Wisconsin and his M.B.A. from the Kellogg School of Management at Northwestern University.

[email protected] +1 312 364 8457

Scott Stevens, managing director and co-head of IT security, joined the investment banking group of William Blair in 2007. Before joining the firm, Scott spent 11 years in several roles with EMC Corporation, including mergers and acquisitions, venture investments, office of the CTO, sales and marketing, and technology alliances. He has a broad background in infrastructure software, systems, and services. Scott graduated from Illinois Wesleyan and received his M.B.A. from the Kellogg School of Management at Northwestern University.


Drew Thomas, vice president in the technology group, joined the investment banking group of William Blair in 2010. Before joining the firm, Drew worked in corporate strategy for Cerner Corporation, a healthcare information technology (HCIT) company. In addition, Drew was an associate with Stone Arch Capital, a middle-market private-equity firm, where he specialized in deal evaluation and execution. Before Stone Arch Capital, Drew was an analyst in the investment banking group of RBC Capital Markets, focusing on technology M&A. Drew holds an M.B.A. from Harvard Business School and a B.B.A. in finance and economics from the Tippie College of Business at the University of Iowa. Drew is a CFA charterholder.


Projecting the IPO Pipeline Examining the fundraising timelines of IT security companies that have gone public since 2012 provides valuable information about the volume and timing of potential IT security IPOs over the next five years.

9.6 years Average span between first recorded private capital raise and IPO

3.8 years Average span between last private capital raise and IPO

Source: Capital IQ

mailto:[email protected]




IT Security Sector – Q1 2015 Update William Blair Spotlight – Recent IT Security & Compliance Transactions 3

William Blair Spotlight – Recent IT Security & Compliance Transactions

• CyberArk is a leading provider of enterprise security software that protects against threats inside enterprise networks.

• William Blair acted as a co-manager for the offering.

• Retail Decisions (ReD) is a world leader in fraud prevention with solutions present at every stage of the payments value chain. Supporting merchants and PSPs, issuers and acquirers, and processors and switch networks in the fight against fraud, ReD serves customers from multiple sectors and across six continents worldwide.

• ACI Worldwide, the universal payments company, powers electronic payments and banking for more than 5,000 clients around the world.

• William Blair represented ReD in connection with its sale to ACI Worldwide.

• Convey Compliance Systems is a leading SaaS-based provider of innovative on-demand tax information reporting and withholding solutions focused on nonwage and investment income.

• Taxware, a portfolio company of Vista Equity Partners, is the leading provider of sales, use, and value-added tax determination software.

• William Blair represented Convey in connection with its sale to Taxware.

• Imprivata is a leading provider of authentication and access management solutions for the healthcare industry.

• William Blair acted as a co-manager for the offering.

• Cyren is a provider of next-generation cloud-based security technology and services, working with 200-plus global partners and leveraging traffic data from numerous notable security providers.

• Offering proceeds will be used to invest in research and development, sales and marketing, and other corporate purposes as the company aims to take advantage of significant opportunities in Web security and cybersecurity platforms.

• William Blair acted as the exclusive placement agent for the offering.

$98,624,000

Initial Public Offering

September 2014

Not Disclosed

has been acquired by

August 2014

Not Disclosed

has merged with

July 2014

$86,250,000


June 2014

$11,500,028

Registered Direct Offering

July 2014


IT Security Sector – Q1 2015 Update 4 2014 William Blair Industry Events Recap

2014 William Blair Industry Events Recap

2014 Private Equity Conference held September 17-18, 2014 at the Four Seasons Hotel Chicago

17th Annual Private Equity Conference • 55 companies participated • More than 640 institutional private-

equity investors and venture capital investors attended

• Roundtable discussions focused on the following industry sectors and topics: – Technology – Financial services – Business services – Commercial services – Consumer and retail – Healthcare – Industrials

18th annual Private Equity Conference to be held September 16-17, 2015 at the Four Seasons in Chicago

2014 Growth Stock Conference held June 10-12, 2014 at the Four Seasons Hotel Chicago

34th Annual Growth Stock Conference • 219 companies participated • High-level speaker percentage

(defined as CEO, chairman, COO, or president) was 70% – More than 960 institutional

clients attended – More than 4,100 one-on-one

meetings took place

35th annual Growth Stock Conference to be held June 9-11, 2015 at the Four Seasons in Chicago

2014 Technology Company Growth Conference held May 15, 2014 at the Four Seasons Hotel San Francisco

2nd Annual Technology Company Growth Conference • 68 leading late-stage private

technology companies presented in 2014

• Business development and financial sponsor attendees: – Public companies with

roughly $1 billion market capitalization

– Large private companies with more than $500 million in revenues

• Operating (or seeking acquisitions) in technology, financial technology, and/or healthcare IT

3rd annual Technology Company Growth Conference to be held May 14, 2015 at the Palace Hotel in San Francisco


IT Security Sector – Q1 2015 Update Relevant William Blair IT Security & Compliance Expertise 5

Relevant William Blair IT Security & Compliance Expertise

IT Security & Compliance Transactions

IT Security Research Coverage

Jonathan Ho joined William Blair in 2005 and specializes in cybersecurity and security technology. Jonathan received his bachelor’s degree from the University of Maryland and his master’s degree from Johns Hopkins. In addition, he received his M.B.A. from the University of Chicago.

(1) Indicates covered until acquired (2) Covered by Bhavan Suri (3) Covered by Jason Ader

$98,624,000


September 2014

Not Disclosed


August 2014

$11,500,028

Registered Direct Offering

July 2014

Not Disclosed

has merged with

July 2014

$86,250,000


June 2014

Not Disclosed


April 2014

$85,698,000


November 2013

$196,350,000

Follow-on Offering

October 2013

Not Disclosed

has sold a majority stake to

November 2012

Not Disclosed

has received a majority investment from

November 2012

$186,000,000


March 2012

$120,500,000


December 2010E Q U I T Y I N V E S T O R SSPECTRUM

SYSTEMS(1)

(1)

(1)

(3)

(2)

(3)

(3)

(3)

(1)


IT Security Sector – Q1 2015 Update 6 IT Security Landscape and Market Valuations

IT Security Landscape and Market Valuations

Next-Generation IT Security

Median Market Valuations EV/Revenue: LTM 7.60x 2015E 5.47x

Company

Market Cap ($M)

LTM Price Performance

EV/2015E Revenue

EV/2015E EBITDA

2015E Revenue Growth

Palo Alto Networks $10,069.1 96.3% 10.01x 54.9x 34.6%

Splunk $6,703.4 (30.4%) 10.17x NMF 31.8%

FireEye $4,947.3 (53.7%) 7.29x NMF 47.2%

Fortinet $5,097.3 43.7% 5.06x 25.7x 15.9%

Cheetah Mobile(1) $2,204.9 22.9% 3.66x 18.6x 87.6%

Barracuda Networks(2) $1,864.6 (3.8%) 5.27x 25.8x 16.3%

Proofpoint $1,855.6 29.3% 7.37x NMF 25.9%

Qualys $1,252.5 30.2% 7.09x 33.2x 20.8%

Imperva $1,195.3 (20.6%) 5.47x NMF 23.1%

Infoblox $1,122.7 (47.8%) 2.80x 25.5x 15.1%

Cyber-Ark Software(1) $1,116.7 129.1% 8.30x NMF 22.1%

Varonis Systems(1) $824.9 52.6% 5.48x NMF 28.0%

MobileIron(1) $709.7 3.8% 3.36x NMF 33.7%

Gigamon $524.1 (47.0%) 2.31x 21.8x 13.4%

Imprivata(1) $355.5 (0.3%) 2.41x NMF 22.3%

(1) LTM price performance shows performance since IPO pricing (2) 2015E is estimated LTM as of February 28, 2016

Traditional IT Security

Median Market Valuations EV/Revenue: LTM 2.58x 2015E 2.48x

Company

Market Cap ($M)

LTM Price Performance

EV/2015E Revenue

EV/2015E EBITDA

2015E Revenue Growth

Symantec $17,688.5 11.0% 2.41x 7.2x (0.5%)

Check Point Software $15,417.7 24.4% 8.92x 15.1x 6.6%

Trend Micro $3,572.9 8.8% 2.48x 7.3x 6.5%

AVG Technologies $1,012.5 16.8% 2.30x 6.5x 13.8%

VASCO Data Security $890.4 199.3% 3.47x 14.3x 14.5%

Guidance Software $211.0 (31.5%) 1.72x 21.3x 3.9%

Zix $210.8 (21.9%) 3.39x 13.9x 11.4% Source: Capital IQ as of January 16, 2015


IT Security Sector – Q1 2015 Update IT Security Sector Market Analysis 7

IT Security Sector Market Analysis

Public Comparable Analysis

Next-Generation IT Security

($ in millions, except per share data)

Company Stock Price 01/16/15

Change Since 52 WK High

LTM Revenue Market Value

Enterprise Value

Enterprise Value/Revenue Enterprise Value/EBITDA 2015E Revenue Growth LTM 2015E 2016E LTM 2015E 2016E

Palo Alto Networks(3) $125.01 (3.4%) $662.3 $10,069.1 $9,769.4 14.75x 10.01x 7.67x NMF 54.9x 31.1x 51.9%

Splunk, (3) $55.28 (47.9%) $403.4 $6,703.4 $5,907.0 14.64x 10.17x 7.77x NMF NMF NMF 50.4%

FireEye(5) $32.89 (66.2%) $364.9 $4,947.3 $4,549.4 12.47x 7.29x 5.28x NMF NMF NMF 63.0%

Fortinet $30.92 (2.4%) $723.7 $5,097.3 $4,436.8 6.13x 5.06x 4.42x 52.8x 25.7x 21.4x 25.4%

Cheetah Mobile $17.21 (44.1%) $235.2 $2,204.9 $1,934.0 8.22x 3.66x 2.01x NMF 18.6x 7.0x 127.4%

Barracuda Networks(4,6) $35.51 (20.0%) $265.6 $1,864.6 $1,697.9 6.39x 5.27x 4.55x NMF 25.8x 23.5x 18.8%

Proofpoint $48.66 (5.5%) $180.3 $1,855.6 $1,783.3 9.89x 7.37x 5.86x NMF NMF NMF 44.8%

Qualys $37.59 (7.7%) $126.0 $1,252.5 $1,139.1 9.04x 7.09x 5.98x NMF 33.2x 25.3x 23.3%

Cyber-Ark Software $36.65 (22.0%) $86.7 $1,116.7 $947.7 10.92x 8.30x 6.79x NMF NMF NMF 25.4%

Infoblox(3) $20.11 (48.6%) $253.5 $1,122.7 $840.7 3.32x 2.80x 2.43x NMF 25.5x 15.9x 6.4%

Imperva $44.96 (33.0%) $155.4 $1,195.3 $1,094.1 7.04x 5.47x 4.50x NMF NMF NMF 18.9%

MobileIron $9.34 (27.9%) $122.7 $709.7 $562.2 4.58x 3.36x 2.58x NMF NMF NMF 18.6%

Varonis Systems $33.58 (40.9%) $93.3 $824.9 $709.6 7.60x 5.48x 4.27x NMF NMF NMF 35.7%

Gigamon(1) $16.10 (56.2%) $149.0 $524.1 $390.0 2.62x 2.31x 2.02x NMF 21.8x 21.0x 6.9%

Imprivata $14.96 (11.9%) $89.6 $355.5 $278.9 3.11x 2.41x 1.93x NMF NMF 40.7x 32.9%

Mean $37.25 (29.2%) $259.1 $2,656.2 $2,402.7 8.05x 5.74x 4.54x 52.8x 29.4x 23.2x 36.7%

Median $33.58 (27.9%) $180.3 $1,252.5 $1,139.1 7.60x 5.47x 4.50x 52.8x 25.7x 22.5x 25.4%

Traditional IT Security

($ in millions, except per share data)

Company Stock Price 01/16/15

Change Since 52 WK High

LTM Revenue

Market Value

Enterprise Value

Enterprise Value/Revenue Enterprise Value/EBITDA 2015E Revenue Growth LTM 2015E 2016E LTM 2015E 2016E

Symantec(2) $25.63 (4.0%) $6,682.0 $17,688.5 $15,990.5 2.39x 2.41x 2.34x 8.2x 7.2x 7.1x (1.1%)

Check Point Software $80.81 (0.9%) $1,462.3 $15,417.7 $14,177.9 9.70x 8.92x 8.42x 17.8x 15.1x 14.2x 7.2%

Trend Micro $35.03 8.3% $1,024.3 $3,572.9 $2,509.2 2.45x 2.48x 2.43x 7.0x 7.3x 7.3x (7.2%)

AVG Technologies $19.63 (8.1%) $375.8 $1,012.5 $968.5 2.58x 2.30x 2.12x 7.3x 6.5x 6.3x (7.7%)

VASCO Data Security $22.69 (25.8%) $182.4 $890.4 $764.5 4.19x 3.47x 3.46x 25.3x 14.3x 13.8x 26.8%

Zix $3.71 (22.2%) $49.8 $210.8 $190.5 3.83x 3.39x NA 18.7x 13.9x NA 4.8%

Guidance Software $7.16 (38.0%) $108.4 $211.0 $195.5 1.80x 1.72x 1.61x NMF 21.3x 12.8x (0.8%)

Mean $27.81 (12.9%) $1,412.1 $5,572.0 $4,971.0 3.85x 3.53x 3.40x 14.0x 12.2x 10.2x 3.1%

Median $22.69 (8.1%) $375.8 $1,012.5 $968.5 2.58x 2.48x 2.38x 13.0x 13.9x 10.0x (0.8%)

Note: Financials shown on calendar year basis unless otherwise noted LTM as of September 30, 2014 or as otherwise noted (1) LTM as of September 27, 2014 (2) LTM as of October 3, 2014 (3) LTM as of October 31, 2014 (4) LTM as of November 30, 2014 (5) Adjusted for the effect of the 2013 Mandiant acquisition (6) 2015E and 2016E is estimated LTM as of February 28, 2016 and 2017, respectively Source: Capital IQ as of January 16, 2015


IT Security Sector – Q1 2015 Update 8 M&A Activity

M&A Activity

Select IT Security Transactions

($ in millions)

Enterprise Value / Date Announced Acquirer Target

Enterprise Value

LTM Revenue

LTM EBITDA

1/13/15 NA NA NA

1/6/15

NA NA NA

12/9/14 $710.0 NA NA

12/4/14 $52.4 0.54x 7.9x

12/1/14

NA NA NA

11/18/14 NA NA NA

11/5/14

NA NA NA

11/5/14 $420.0 NA NA

10/30/14 NA NA NA

10/23/14 $35.0 NA NA

10/21/14 $232.5 NA NA

10/14/14 NA NA NA

10/2/14

(Certain Assets) NA NA NA

9/4/14 $15.0 NA NA

9/3/14

$220.0 6.60x NA

9/2/14

$310.0 3.10x NA

8/13/14 $300.0 5.00x NA

8/11/14 NA NA NA

8/8/14

$890.0 NA NA

8/7/14

NA NA NA


IT Security Sector – Q1 2015 Update M&A Activity 9


($ in millions)


Enterprise Value

LTM Revenue

LTM EBITDA

8/6/14

NA NA NA

7/31/14 NA NA NA

7/31/14 NA NA NA

7/29/14 NA NA NA

7/21/14 $205.0 NA NA

7/7/14 NA NA NA

7/1/14

(MNS Holdings) $28.2 0.84x NA

6/11/14 NA NA NA

5/27/14 NA NA NA

5/21/14

$15.0 NA NA

5/20/14 $24.0 NA NA

5/6/14 $60.0 8.60x NA

5/1/14 NA NA NA

4/22/14 NA NA NA

3/21/14

NA NA NA

3/19/14 $200.0 NA NA

3/18/14 $15.0 1.50x NA

2/19/14 $350.0 4.70x NA

2/13/14 NA NA NA

2/10/14

$100.0 NA NA

1/22/14 $1,540.0 15.00x NA


IT Security Sector – Q1 2015 Update 10 M&A Activity


($ in millions)


Enterprise Value

LTM Revenue

LTM EBITDA

1/17/14 NA NA NA

1/6/14 NA NA NA

1/2/14 $1,050.0 9.50x NA

12/17/13 NA NA NA

12/9/13 $47.8 2.50x NA

12/2/13 $370.0 7.40x NA

12/2/13 $84.0 5.70x NA

11/11/13 $25.0 1.10x NA

11/7/13 NA NA NA

10/16/13 / NA NA NA

10/1/13 $310.0 14.10x NA

9/30/13 $20.0 NA NA

9/18/13 NA NA NA

9/17/13

NA NA NA

9/3/13 NA NA NA

8/20/13 $300.0 8.30x NA

8/15/13 $900.0 25.70x NA

7/23/13

$2,161.4 9.28x NMF

7/8/13

$225.0 9.00x NA

6/26/13 (Mobility Services) NA NA NA

6/25/13 NA NA NA

http://www.highcloudsecurity.com/news/highcloud-joins-forces-with-hytrust/

http://www.bip.lu/index.html

http://www.utimaco.com/


IT Security Sector – Q1 2015 Update M&A Activity 11


($ in millions)


Enterprise Value

LTM Revenue

LTM EBITDA

6/17/13

$204.6 NA NA

6/10/13

NA NA NA

6/5/13 NA NA NA

5/22/13 $225.0 18.80x NA

5/20/13 $966.2 2.69x 17.8x

3/6/13 $376.2 7.00x NMF

4/29/13

$17.4 1.05x 6.0x

4/9/13 NA NA NA

4/3/13 NA NA NA

3/11/13 $125.0 3.30x NA

1/29/13

NA NA NA

Sources: Capital IQ, 451 Research, and Dealogic as of January 16, 2015


IT Security Sector – Q1 2015 Update 12 Equity Capital Markets Activity

Equity Capital Markets Activity

IPOs and Follow-on Offerings

($ in millions)

Pricing Date Issuer Security Sector Offering Size Ticker Symbol Exchange Deal Type

9/23/14 CyberArk Account Security $85.8 CYBR NASDAQ IPO

6/25/14 Imprivata Identity and access management $75.0 IMPR NYSE IPO

6/12/14 MobileIron Mobile device management/security $99.9 MOBL NASDAQ IPO

5/08/14 Cheetah Mobile Mobile security $168.0 CMCM NYSE ADS

2/27/14 Varonis Data protection and management $105.6 VRNS NASDAQ IPO

11/5/13 Barracuda Networks Security and storage $85.7 CUDA NYSE IPO

10/22/13 Gigamon Network visibility $196.4 GIMO NYSE FO

9/19/13 FireEye NG malware and APT protection $303.5 FEYE NASDAQ IPO

6/12/13 Gigamon Network visibility $128.3 GIMO NYSE IPO

10/17/12 Palo Alto Networks Next-generation firewall $302.4 PANW NYSE FO

10/4/12 Infoblox IP address management $100.0 BLOX NYSE FO

10/3/12 LifeLock Identity theft protection $141.3 LOCK NYSE IPO

9/27/12 Qualys Vulnerability scanning/SaaS $104.5 QLYS NASDAQ IPO

7/19/12 Palo Alto Networks Next-generation firewall $299.5 PANW NYSE IPO

7/19/12 Splunk Analytics/systems management $381.5 SPLK NASDAQ FO

4/19/12 Infoblox IP address management $138.0 BLOX NYSE IPO

4/19/12 Proofpoint Application security/SaaS $94.0 PFPT NASDAQ IPO

4/18/12 Splunk Analytics/systems management $263.9 SPLK NASDAQ IPO

2/1/12 AVG Technologies Endpoint protection $128.0 AVG NYSE IPO

11/8/11 Imperva Data protection $103.5 IMPV NYSE IPO

Note: Blue text indicates a William Blair transaction Sources: Capital IQ and Dealogic as of January 16, 2015


IT Security Sector – Q1 2015 Update Minority Equity Raises 13

Minority Equity Raises

Select Transactions Since January 1, 2014

($ in millions)

Date Announced Target Investor(s)

Transaction Value Business Description

12/31/14 iSight Partners Bessemer Venture Partners $35.0 iSight Partners provides cyber threat intelligence solutions.

12/17/14 Rapid7 Technology Crossover Ventures; Bain Capital Ventures

$30.0 Rapid7 provides security data and analytics software and cloud solutions.

12/16/14 OneLogin Charles River Ventures; Scale Venture Partners; The Social+Capital Partnership

$25.0 OneLogin provides on-demand identity and access management solutions for organizations.

12/10/14 Ionic Security Kleiner Perkins Caufield & Byers; MeriTech Capital Partners; JAFCO Ventures; TechOperators; Google Ventures

$40.2 Ionic Security offers a unified data and mobility security platform.

12/9/14 DB Networks Grotech Ventures; Khosla Ventures; Citi Ventures

$17.0 DB Networks provides behavioral analysis solutions for intrusion detection and database security.

12/4/14 ThreatStream General Catalyst Partners; Institutional Venture Partners; Paladin Capital Group; Google Ventures

$22.0 ThreatStream provides a threat intelligence platform that identifies cyber threats and facilitates trusted threat sharing.

12/2/14 NowSecure Baird Venture Partners; Jump Capital; Math Venture Partners

$12.5 NowSecure, formerly viaForensics, provides digital forensics consulting and security services.

11/19/14 Icebrg Madrona Venture Group; Formation8 Partners

$3.1 Icebrg provides network security solutions.

11/19/14 CipherCloud T-Venture Holding; Delta Partners; Andreessen Horowitz; Emerging Markets TMT; Transamerica Ventures

$50.0 CipherCloud provides cloud information protection solutions.

11/18/14 Menlo Security Osage Partners; General Catalyst Partners $10.5 Menlo Security provides cyber security software.

11/11/14 Evident.io True Ventures; Bain Capital Ventures $9.9 Evident.io provides cloud security services.

11/11/14 Forter New Enterprise Associates; Sequoia Capital

$15.0 Forter provides online retailers with plug-and-play real-time technology that enables e-commerce fraud prevention services.

11/10/14 Avalara Warburg Pincus $100.0 Avalara provides cloud-based software that delivers sales tax and other transactional taxes compliance solutions,

11/7/14 Endgame Bessemer Venture Partners; Columbia Capital; Kleiner Perkins Caufield & Byers; Paladin Capital; Top Tier Capital

$30.0 Endgame provides security solutions using data science to deliver intelligence and visibility into the digital domain.

11/7/14 Datashield Huntington Capital $4.0 Datashield provides data security and managed security, and security consulting services to the mid-market clients in North America.

11/5/14 CloudLock Ascent Venture Partners; Bessemer Venture Partners; Cedar Fund

$6.7 CloudLock is a cloud data security company.

10/22/14 Prelert Sierra Ventures; Intel Capital; Fairhaven Capital Partners; Fairhaven Capital Partners

$8.1 Prelert develops and delivers predictive analytics software.

10/22/14 Spikes Security Benhamou Global Ventures; Javelin Venture Partners; Lakewood & Company

$11.0 Spikes Security provides security software solutions to businesses.


IT Security Sector – Q1 2015 Update 14 Minority Equity Raises


($ in millions)



10/14/14 Loggly Matrix Partners; Trinity Ventures; True Ventures; Cisco Investments; Harmony Partners; Data Collective

$15.0 Loggly develops a cloud based application intelligence solutions for app developers.

9/22/14 Duo Security Benchmark Capital; True Ventures; Radar Partners; Google Ventures

$12.0 Duo Security provides two-factor authentication as a service to prevent account takeover and data theft.

9/17/14 Sentrix Cedar Fund; Magma Venture Partners $6.0 Sentrix provides cloud-based website security solutions for enterprises.

9/16/14 Vahna International Investment & Underwriting NA Vahna provides an IT security platform for the detection and mitigation of cyberattacks on workstations and servers.

9/16/14 eSentire Edison Partners; VentureLink; Cisco Investments; Georgian Partners; Northleaf Capital Partners

$14.0 eSentire provides managed security solutions to help guard the intellectual property and infrastructure of enterprises.

9/12/14 Agari Data Alloy Ventures, Inc.; Battery Ventures; Scale Venture Partners; First Round Capital

$15.0 Agari Data provides e-mail security solutions.

9/11/14 Ping Identity Draper Fisher Jurvetson; Kohlberg Kravis Roberts & Co; SAP Ventures; General Catalyst; W Capital

$35.0 Ping Identity provides cloud identity security and management solutions.

9/10/14 Light Cyber Battery Ventures; Glilot Capital Partners $10.0 Light Cyber develops solutions for identifying and preventing cyber-attacks and advanced persistent threats.

8/27/14 Veracode Wellington Management Company $40.0 Veracode provides a cloud-based application security platform.

8/27/14 MetricStream Goldman Sachs Merchant Banking; Kaiser Permanente Ventures; Sageview Capital

$60.0 MetricStream provides enterprise governance, risk, compliance, and quality management services.

8/13/14 Lookout Accel Partners; Andreessen Horowitz; Bezos Expeditions; Goldman Sachs

$150.0 Lookout develops cloud-based consumer mobile device security applications.

7/29/14 ThetaRay Jerusalem Venture Partners; General Electric; Paolim Ventures

$10.0 ThetaRay offers malware detection and prevention solutions.

7/22/14 Privacy Analytics BDC Venture Capital; Ontario Institute for Cancer Research, Endowment Arm; Vanedge Capital

$3.5 Privacy Analytics provides organizations with data anonymization solutions to safeguard and enable data for secondary purposes.

7/22/14 EdgeWave TVC Capital $6.0 EdgeWave develops and markets on demand, on-premises, and hybrid secure content management solutions.

7/11/14 LogRhythm Adams Street Partners; Access Venture Partners; Riverwood Capital

$40.0 LogRhythm operates as a security intelligence company.

7/10/14 Malwarebytes Highland Capital Partners $30.0 Malwarebytes provides anti-malware software solutions.

7/8/14 Bay Dynamics Comcast Ventures $8.0 Bay Dynamics provides information risk intelligence and IT analytics solutions.

6/19/14 ForgeRock Accel Partners; Foundation Capital; MeriTech Capital Partners

$30.0 ForgeRock provides open-source identity and access management solutions.




($ in millions)



6/19/14 Skyhigh Networks Sequoia Capital; Salesforce.com; Greylock Partners

$40.0 Skyhigh Networks provides security, compliance, and governance solutions for cloud services.

6/18/14 Prevalent Fulcrum Equity Partners $4.0 Prevalent provides software solutions and services, and cloud-based compliance and risk solutions.

6/17/14 Kony Insight Venture Partners; Hamilton Lane; SoftBank Capital; Georgian Partners; Delta-v Capital; Telstra

$50.0 Kony provides a multichannel application development platform.

6/17/14 Virtru Bessemer Venture Partners $6.0 Virtru provides digital content privacy and security solutions.

6/16/14 CounterTack Razor's Edge Ventures $5.0 CounterTack provides in-progress attack intelligence and response solutions.

6/11/14 White Ops Grotech Ventures; Paladin Capital Group $13.1 White Ops provides online fraud detection solutions.

6/10/14 Exabeam Norwest Venture Partners; Aspect Ventures $10.0 Exabeam offers data security solutions.

6/9/14 Okta Sequoia Capital; Janus Capital Group; Khosla Ventures; Andreessen Horowitz; Altimeter Capital Management; Greylock Partners

$75.0 Okta provides cloud application management services.

6/2/14 Fortscale Security Blumberg Capital; Intel Capital; Swarth Investments

$10.0 Fortscale Security helps enterprises defend themselves against targeted attacks and cyber campaigns.

5/29/14 Observable Networks

Brooke Private Equity; Vectis; Stifel Nicolaus Weisel

$2.5 Observable Networks provides network security technology and threat detection services.

5/28/14 HackerOne Benchmark Capital $9.0 HackerOne provides a solution for security vulnerability disclosure.

5/28/14 Distil Foundry Group; IDEA Fund Partners; ff Venture Capital; Bullet Time; Militello Capital

$10.0 Distil offers cloud-based software-as-a-service that protects online content.

5/21/14 Silent Circle Cain Capital $30.0 Silent Circle offers a mobile application that allows users to send encrypted media from their mobile devices.

5/20/14 RiskIQ Battery Ventures; Summit Partners $25.0 RiskIQ provides a software-as-a-service product that eliminates online and mobile threats.

5/20/14 Sumo Logic Accel Partners; Sequoia Capital; Sutter Hill Ventures; Greylock Partners

$30.0 Sumo Logic provides log management and analytics services.

5/16/14 Centrify Samsung Venture Investment Corporation; Fortinet; DoCoMo Capital; Keating Capital

$42.0 Centrify provides integrated software solutions that centrally control, secure, and audit access to cross-platform systems.

5/16/14 Dashlane Bessemer Venture Partners; Rho Ventures; FirstMark Capital

$21.7 Dashlane provides consumer Internet application for online transactions and activities.

5/15/14 Verafin Spectrum Equity Investors $60.0 Verafin provides compliance, anti-money laundering, and fraud detection software.


IT Security Sector – Q1 2015 Update 16 Minority Equity Raises


($ in millions)



5/15/14 OpenDNS Cisco Investments; Greylock Partners; Lumia Capital; Northgate Capital Group; Sequoia Capital

$35.0 OpenDNS provides Internet security and domain name system services.

5/15/14 Netskope Accel Partners; Lightspeed Venture Partners; The Social+Capital Partnership

$35.0 Netskope provides a SaaS-based platform that helps people get and use their favorite cloud applications safely.

5/14/14 Sift Science Union Square Ventures; Spark Capital Partners; First Round Capital; Spark Capital

$18.0 Sift Science is an online platform that helps clients to fight fraud with large-scale machine learning.

5/1/14 CertiVox Octopus Investments; NTT Docomo Ventures $8.0 CertiVox Limited provides encryption, key management, and identity management solutions for corporations, governments, and individuals.

4/29/14 Vorstack TechOperators; EMC Ventures; Aligned Partners

$5.2 Vorstack provides shared threat intelligence and collaboration solutions.

4/21/14 Area 1 Security Kleiner Perkins Caufield & Byers; Allegis Capital; First Round Capital; Cowboy Ventures

$2.5 Area 1 Security provides a threat intelligence solution for eliminating socially engineered cyber-attacks.

4/21/14 Damballa Adams Street Partners; Imlay Investments.; InterWest Partners; Noro-Moseley Partners; Palomar Ventures; Sigma Partners

$13.0 Damballa provides security solutions that protect from cyber threat attacks used for organized crime.

4/17/14 EyeVerify Sprint; Qihoo 360 Technology; Samsung Electronics; Mid-America Angels

$6.3 EyeVerify provides biometric solutions for mobile devices.

4/16/14 FireHost The Stephens Group $25.0 FireHost provides HIPAA and PCI compliant cloud hosting solutions to protect websites and business assets.

4/15/14 TeleSign Adams Street Partners; Summit Partners; March Capital Partners; March Capital Partners

$49.4 TeleSign provides phone-based verification, authentication, and notification services through SMS and voice messaging.

4/14/14 ZeroFOX New Enterprise Associates; Core Capital Partners; Genacast Ventures

$10.3 ZeroFOX provides real-time social threat analytics, intelligence, and advanced security protection.

4/9/14 HackSurfer Boulder Ventures; CNF Investments $3.5 HackSurfer is a cybercrime threat awareness platform.

4/9/14 GreenSQL Jerusalem Venture Partners; Magma Venture Partners; Gandyr Investments; Rhodium; Atlantic Capital Partners; 2B Angels

$7.0 GreenSQL provides unified database security solutions for small and medium businesses, and enterprise markets.

4/2/14 Sookasa Accel Partners; First Round Capital; Andreessen Horowitz; SV Angel

$5.0 Sookasa protects sensitive files across cloud services and devices.

3/19/14 Verdasys Brookline Venture Partners; Fairhaven Capital Partners; General Electric

$12.0 Verdasys provides enterprise information protection solutions.

3/11/14 ThreatMetrix Adams Street Partners; August Capital; CM Capital Investments; Tenaya Capital; U.S. Venture Partners

$20.0 ThreatMetrix provides a cloud-based fraud prevention platform for online businesses.

3/6/14 Optio Labs Allied Minds

$10.0 Optio Labs develops mobile security technologies.

3/2/14 Wickr Alsop Louie Partners; Knight Foundation; Juniper Networks

$9.0 Wickr provides a mobile application that provides military-grade encryption of text, picture, audio, and video messages.




($ in millions)



2/26/14 CounterTack Arsenal Venture Partners; OnPoint Technologies

$3.0 CounterTack provides in-progress attack intelligence and response solutions.

2/25/14 CyberSense BRM Group; Opus Capital

$5.0 CyberSense provides cloud-based and on-premise cyber security solutions.

2/25/14 Ionic Security ff Venture Capital; Google Ventures; JAFCO Ventures; Kleiner Perkins Caufield & Byers; TechOperators; Webb Investment Network

$25.6 Ionic Security offers a unified data and mobility security platform.

2/24/14 Bitium Amplify.LA; Double M Partners; Karlin Ventures; Lazerow Ventures; Polaris Partners; Resolute Ventures; Social Leverage

$6.5 Bitium develops and delivers a SaaS-based operating system to manage Web-based apps.

2/21/14 Shape Security Allegis Capital; Google Ventures; Kleiner Perkins Caufield & Byers; Norwest Venture Partners; Sierra Ventures

$40.0 Shape Security develops web defense products that protect e-commerce and social network websites.

2/20/14 THREATSTREAM Google Ventures; Paladin Capital Group

$4.0 THREATSTREAM develops and delivers a threat intelligence platform.

2/20/14 Cylance Fairhaven Capital Partners; Khosla Ventures; The Blackstone Group

$20.0 Cylance is a math-based threat detection and prevention company.

2/18/14 FireLayers YL Ventures NA FireLayers creates solutions that empower organizations to control and protect their cloud applications.

2/13/14 CloudPassage Benchmark Capital; MeriTech Capital Partners; Musea Ventures; Shasta Ventures; Tenaya Capital

$25.5 CloudPassage provides server security products for public and hybrid cloud hosting environments.

2/11/14 Cybereason Charles River Ventures $4.6 Cybereason operates an automated platform to protect against cyber-attacks.

2/10/14 Bit9 .406 Ventures; Atlas Venture; Highland Capital Partners; Kleiner Perkins Caufield & Byers; Sequoia Capital

$38.3 Bit9 provides threat protection solutions for endpoints and servers.

2/5/14 AVAST Software CVC Capital Partners NA AVAST provides security software for PCs, smartphones, and tablets for businesses and home users.

1/23/14 CloudLock Ascent Venture Partners; Bessemer Venture Partners; Cedar Fund

$16.5 CloudLock is a cloud data security company.

1/23/14 UNIKEN Nexus Venture Partners $4.8 UNIKEN provides an enterprise security technology platform for banks and financial institutions.

1/21/14 Aorato Accel Partners; Glilot Capital Partners; Innovation Endeavors

$10.0 Aorato provides a technology that protects enterprise resources from advanced cyber-attacks.

1/20/14 Adallom Index Ventures; Sequoia Capital Israel $15.0 Adallom develops security solutions for sensitive and regulated data.

Sources: Capital IQ, 451 Research, and Dealogic as of January 16, 2015


IT Security Sector – Q1 2015 Update 18 Notes

Notes


William Blair is a trade name for William Blair & Company, L.L.C. and William Blair International, Limited. William Blair & Company, L.L.C., is a Delaware company and is regulated by the Securities and Exchange Commission, The Financial Industry Regulatory Authority, and other principal exchanges. William Blair International Limited is authorised and regulated by the Financial Conduct Authority ("FCA") in the United Kingdom. William Blair & Company® only offers products and services where it is permitted to do so. Some of these products and services are only offered to persons or institutions situated within the United States and are not offered to persons or institutions outside of the United States.

This material has been approved for distribution in the United Kingdom by William Blair International Limited, Regulated by the Financial Conduct Authority (FCA), and is directed only at, and is only made available to, persons falling within COB 3.5 and 3.6 of the FCA Handbook (being “Eligible Counterparties” and Professional Clients). This Document is not to be distributed or passed on to any “Retail Clients.” No persons other than persons to whom this document is directed should rely on it or its contents or use it as the basis to make an investment decision.

William Blair & Company | 222 West Adams Street | Chicago, Illinois 60606 | +1 312 236 1600 | williamblair.com January 1, 2015

IT Security Sector – Q1 2015 Update

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