cybersecurity snapshot | july 2016
TRANSCRIPT
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Cybersecurity Snapshot July 2016
Advisors & Dealmakers In Cybersecurity
Momentum Partners • Momentum Capital Markets
6 13
16
7
16
5 5 3 6
21
14
3
12
4 11
Cybersecurity Deal Dashboard
Top Financing Transactions YTD Top M&A Transactions YTD
Target Acquirer Amount ($M)
4,772
1,453
600
486
360
293
275
100
$8.69 Billion M&A Volume YTD
75 M&A Transactions YTD
$3.01 Billion
Date Company Amount ($M)
1/13/16 187
7/25/16 180
6/8/16 100
2/3/16 96
1/21/16 76
1/28/16 75
7/5/16 64
7/15/16 50
Financing Volume YTD 145
Financing Transactions YTD
StackPath
Financing Activity M&A Activity
Volume ($B)
# of Deals
2015 Total: 232
2016 Total: 145
Volume ($B)
# of Deals 2015 2016
Public Comps
Max 14.2x
Max 8.6x
Min 2.1x Min 1.3x
Median 4.5x
Median 8.3x
(EV / 2015E) (EV / 2016E)
4.5x 5.8x
2015 2016 YTD
M&A EV/Rev Multiples
M&A Activity
2015 Total: 142
2016 Total: 75
142
75
2015 2016 YTD
21
19
9
10
16 8
12
5
7
13
2 7
7 5 4
40
24
23
19 19
19
17
17
13
11
10 9
7 4
Specialized Threat Analysis & Protection
Threat Intel / SecOps / IR
Identity & Access Management
Cloud Security
Data Security
Mobile Security
Endpoint Security
Fraud Prevention / Transaction Security
Application Security
Risk & Compliance
Web Security
Industrial / IOT Security
Network Security
Messaging Security
MSSP
4 6
15
2
6 3 2 1 2
12
5
1
9
1 6
$10.4
$8.7
2015 2016 YTD
232
145
2015 2016 YTD
$3.9
$3.0
2015 2016 YTD
Financing Activity
5
10
15
20
25
30
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16
Monthly Deal Count Pulse Financing
M&A
Source: Capital IQ, Crunchbase.
Date Target Acquirer Sub-Sector EV ($M) EV / Rev
07/27/16 Risk & Compliance NA NA
07/26/16 Application Security NA NA
07/25/16 Identity & Access
Management $20.8 1.6x
07/25/16 Web Security NA NA
07/25/16 Web Security NA NA
07/22/16 Specialized Threat
Analysis & Protection NA NA
07/19/16 Endpoint Security NA NA
07/17/16 Application Security NA NA
07/14/16 MSSP NA NA
07/13/16 Identity & Access
Management $486.3 3.9x
07/11/16 Data Security NA NA
07/07/16 Endpoint Security $1,453.3 3.4x
Cybersecurity M&A Strategic Deal Flow Commentary
M&A Activity
§ 12 transactions were announced with total disclosed amount of $1.96 Billion
§ Two public companies were acquired – Imprivata and AVG – continuing the trend of large acquisitions post Symantec / Blue Coat
Financing Activity
§ 26 transactions with total disclosed amount raised of $562.8 million with a median amount raised of $10.0 million
§ Roughly 1/2 of deals were early stage (Seed to Series A)
§ StackPath emerged from stealth and raised a $180M Series A, in addition to announcing the acquisitions of 4 companies (See Notable Financings)
§ Three Momentum ‘Watch List’ companies raised additional funding:
July Deal Flow Strategic Activity Accelerated Through The End Of July.
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StackPath
StackPath
Date Company Select Investors Funding
Stage Amount
($M)
7/28/16 Keshif Ventures, Blu Ventures, JHS Ventures Series A 5.0
7/27/16 Paladin Capital Group, Bessemer Venture Partners Series C 42.5
7/27/16 Khosla Ventures Series A 7.8
7/26/16 Accel (Series A), Ignition Partners (Series B), Elieses (Series B)
Series A+B 17.0
7/26/16 Deutsche Telekom Partners, Hewlett Packard Pathfinder, Maverick Ventures, Sequoia, Shlomo Kramer
Series A 15.0
7/25/16 ABRY Partners, Insiders Series A 180.0
7/21/16 Fishtech Labs Venture 3.0
7/20/16 Freeman Group Seed 3.3
7/20/16 Adara Ventures, Orza Investments, Wayra Seed 1.1
7/19/16 Insight Venture Partners, Spark Capital, Union Square
Ventures Series C 30.0
7/19/16 83North, Battery Ventures, Cisco Investments Series B 20.0
7/19/16 Foundation Capital, Shasta Ventures, New York Life
Insurance, Pitango, Lane Bess, Peter McKay Series B 16.5
7/19/16 Accelerate IT Ventures, Grayhawk Capital, Benhamou
Global Ventures, Generation Ventures, Series A 10.0
Note: Bold denotes lead investors. Source: Capital IQ, Crunchbase.
Date Company Select Investors Funding
Stage Amount
($M)
7/16/16 Signal Peak Ventures, Cybersecurity Investments Seed 5.5
7/15/16 Santander Bank Series C 50.0
7/14/16 Allegis Capital, Blackstone, GV, MassMutual Ventures,
Rally Ventures, Secure Octane, TenEleven Ventures Series A 9.0
7/13/16 Carrick Capital Partners, Comcast Ventures Series B 23.0
7/13/16 Vertex Ventures, Aspect Ventures, Magma Venture Partners Series A 12.0
7/13/16 Trident Capital Cybersecurity, Blue Coat, U.S. Venture
Partners, Venrock, Knollwood Investment Advisory Series B-1 7.0
7/12/16 Greycroft Partners, Bloomberg Beta, Cisco, Jump Capital,
K2 Intelligence, Leaders Fund, TechOperators Series B 10.0
7/8/16 NA N/A N/A
7/7/16 AM Partners, VMS Investment Group Series A 10.3
7/6/16 TenEleven Ventures, Rally Ventures, YL Ventures Series A 10.0
7/6/16 Menlo Ventures, New Enterprise Associates Series A 8.2
7/5/16 KKR, Hoxton Ventures, Softbank, Summit Partners,
TenEleven Ventures Series C 64.0
7/5/16 NA Undisclosed 2.7
Cybersecurity Investing (VC & PE)
July Deal Flow Venture Capital & Private Equity Activity For The Month of July.
StackPath
4
Notable Financing Transactions
1
$64.0M
Series C Financing
July 5, 2016
$180.0M
Series A Financing
July 25, 2016
StackPath
64.0
22.5
18.0
Description
Darktrace is a leader in Enterprise Immune System technology, a new category of cyber solutions based on pioneering Bayesian mathematics. Darktrace addresses the challenge of insider threat and advanced cyber-attacks through its unique ability to detect previously unidentified threats in real time, as manifested in the emerging behaviors of the network, devices and individuals. Some of the world’s largest organizations rely on Darktrace’s adaptive, self-learning platform to spot anomalous activity within the enterprise, in sectors including energy and utilities, financial services, telecommunications, retail and transportation.
Founders / Management
Founded 2013 HQ London, England Amount Raised $104.5M in 3 Rounds
Raises $64M In Series C Financing.
Company Overview Product Overview
Jack Stockdale Global CTO
Gary Szukalski CMO
Poppy Gustafsson COO
Steve Chamberlain CFO
Nicole Eagan CEO
Founded By Intelligence Experts From Cambridge, MI5, and GCHQ
Driven By World-Leading Mathematicians
Security Company of the Year 2016
Revenue growth over 100% since
2014
Selected Customers
Self-learns, Self-Defends In Real Time
Enterprise Immune System
No Rules or Signatures
Advanced Machine Learning
Real-Time Threat Detection
Date Stage Amount Raised ($M) Selected Investors
Jul 2016 Series C
Jul 2015 Series B
Mar 2015 Series A
Funding Summary: $104.5M
Threat Visualizer
Shines a Light Into Your Network
§ Unique Global View of Enterprise § Flexible Dashboard
§ Real-time Global Threat Mapping
§ Extends Darktrace’s Core Power of Detection
§ Stops Threats Before They Spread § Action Taken is Always Highly Targeted
Antigena
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Description
StackPath is a web services platform for security, speed and scale. It is the first platform to unify enterprise security solutions by leveraging collaborative intelligence that makes each service smarter and more secure with every threat detected, in addition to vastly improving the customer experience. It effectively deputizes each service on the host network with the authority to identify and communicate real-time threats against it to an intelligent data repository.
Founders / Management
Founded 2015 HQ Dallas, Texas Amount Raised $180 M
StackPath Raises $180 Million In A Series A Round & Acquires Four Companies In The Process.
Company Overview Product Overview
Funding Summary: $180.0M
StackPath Acquisition Summary
Paul Drew CIO
Dr. Lance Crosby Chairman & CEO
Andrew Higginotham COO, President
Date Acquired Company Company Description
July 2016 MaxCDN is a content delivery network that helps companies accelerate static
and dynamic content around the world.
July 2016 Fireblade offers web security services in the areas of DDoS protection, Web application security, performance monitoring, and web acceleration aspects.
July 2016 Staminus develops advanced security availability technology to mitigate the
largest and most complex DDoS attacks in the world.
April 2016 Cloak is a consumer VPN platform with native iOS and Mac applications to
allow people to securely use the internet while on untrusted networks.
StackPath
Security Network Web Services Built Secure, Powered
By Machine Learning
§ Cloud based DDoS protection technology
§ Layers of physical security
§ Data secured with AES and TLS
Frictionless Global Scale, Built On Security
§ Built for 100Gbps connectivity § Designed for customers growth § Regular vulnerability scans look for
unauthorized usages
Why StackPath?
Transparency
Simplicity
Support Scale Speed
24/7 Customer Support
Publish Net Promoter Score (NPS) and real-time network latency statistics to website
Unified interface for all of your essential
services for scalability
Speed, not only from network capacity but from support as well
Only web services platform with flat, global pricing and no contracts
Simplicity
Date Stage Amount Raised ($M) Selected Investors
July 2016 Series A
Insiders
150.0
30.0
Kimberly Sheehy CFO
Taylor Dondich VP Engineering
8
Notable M&A Transactions
1
July 7, 2016 July 13, 2016
acquired acquired
AVG Stock Performance Since 2015
Avast Acquires AVG In 2nd Biggest Security Deal of Year Avast + AVG Creates Significant Scale In Consumer Security.
Transaction Overview
Acquired
Date: EV / LTM Rev: EV / NTM Rev: EV / LTM EBITDA: EV / NTM EBITDA:
7/7/2016
3.4x
3.2x
§ Avast will acquire AVG for $1.3 billion in cash, paying $25 a share, a 33% premium over 7/6 closing price and 32% over 6-mo average
§ Avast plans to finance the transaction using cash balances on hand and committed debt financing from third party lenders
§ Avast has received a financing commitment of $1.69 billion from Credit Suisse, Jefferies and UBS
§ In addition, Avast has contributed $150 million in equity
Endpoint Security $1.45 Billion
§ Advanced web and cloud security § Encrypted traffic management § Network performance and optimization
Transaction Funding
Rationale
Source: Company press releases and websites, 451 Research.
11.3x
9.0x
"Our new scale will allow us to accelerate investments in growing markets and continue to focus on providing comprehensive and simple-to-use solutions for consumers and businesses, alike. As the definition of online
security continues to shift from being device-centric, to being concerned with devices, data and people, we believe the combined company, with the strengthened value proposition, will emerge as a leader in this growing
market,“ said Gary Kovacs, CEO, AVG
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$15
$20
$25
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16
Shar
e Pr
ice
($) Avast Purchase Price @ $25 / Share
Mobile Users 60+ Million
Desktop Users:
170+ Million
Desktop Users:
90+ Million
Mobile Users: 100+ Million Scale In
Consumer Security
400M+ Users
§ Combination creates significant scale in consumer security with 400M+ users, including 160M+ on mobile
§ AVG will provide Avast with new growth in consumer mobile and SMB markets
§ Highly complementary geographical presence extends Avast’s reach into higher monetizing geos
Imprivata Overview
Thoma Bravo Acquires Healthcare IT Security Company Imprivata Imprivata Became The Second Public Cybersecurity Company To Get Acquired In July.
Transaction Overview
Acquired
Date: EV / LTM Rev: EV / LTM EBITDA:
7/13/2016
3.9x
NM
Identity & Access Management $486.3 Million
+ Platform Capabilities
Source: Company press releases and websites, Capital IQ, 451 Research.
Imprivata Confirm ID
§ Comprehensive identity and two-factor identification platform
§ Combines security with convenience § Creates a secure chain of trust
OneSign
Enables secure collaboration across care teams and organizations
Single sign-on, authentication management, and virtual desktop roaming enabling
Rationale Transaction Details
HQ: Lexington, MA Founded: 2001 CEO: Omar Hussain Users: 2,800,000+
§ Thoma Bravo to acquire the remaining 95.2% stake in Imprivata, funded with equity from Thoma Bravo Fund XII
§ Imprivata acquired for $19.25, a 33% premium to Imprivata’s last closing price of $14.50
§ Imprivata made its public debut in June 2014 at a price of $15.00
§ “We're tremendously excited about Thoma Bravo's investment in our company and believe this transaction represents a great outcome for our current shareholders. Given Thoma Bravo's successful track record in both security and healthcare IT, today's partnership is an endorsement of Imprivata's corporate vision and our relentless focus on the customer experience -- a value which has established us as the vendor of choice in healthcare IT security.” – Omar Hussain, President & CEO of Imprivata
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Stock Price Performance Cybersecurity Bounced Back Into Positive Territory Through July, But Remains Down Over The Last Year.
Note: Market data as of July 29, 2016. Source: Capital IQ.
CompanyC Price Change (%) Company Price Change (%)
$24.73 30% $130.89 7%
$22.08 46% $75.87 20%
$76.88 4% $31.39 5%
$56.39 16% $13.98 11%
$17.42 6% $14.81 5%
$34.69 10% $3.31 18%
$3.23 15% $62.54 15%
$47.12 10% $20.43 1%
$19.12 37% $36.56 11%
$11.03 10% $16.71 2%
$3.41 12%
July Stock Price Performance
LTM Indexed Stock Performance
July Indexed Stock Performance
High Growth Security
Low Growth Security
S&P 500
NASDAQ
HACK
Index
95
100
105
110
115
6/30 7/04 7/08 7/12 7/16 7/20 7/24 7/28
8.5%
10.6%
1.9%
3.6%
6.6%
50
60
70
80
90
100
110
Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
-15.1%
-22.7%
3.3%
-12.6%
0.7%
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Earnings Scorecard Earnings Release Calendar And Results.
83.9 | 86.7
Cons. | Act.
0.11 | 0.20 EPS:
421.6 | 423.0
Cons. | Act.
1.07 | 1.09 EPS:
304.5 | 311.4
Cons. | Act.
0.14 | 0.14 EPS:
84.2 | 89.9
Cons. | Act.
(0.07) | 0.06 EPS:
Rev:
2Q16 1Q17
Rev:
2Q16
Rev:
2Q16 2Q16 2Q16
Rev:
2Q16
2Q16 2Q16 2Q16 1Q17 4Q16 2Q16 2Q16
2Q16 1Q17 2Q17 1Q17 2Q16 2Q16 IPO Pipeline
August 9, 2016 5:00 PM EST
+1 844-237-3590 #47864998
37.8 | 38.9
Cons. | Act.
(0.16) | (0.14) EPS:
Rev:
51.2 | 54.3
Cons. | Act.
EPS:
Rev:
0.16 | 0.15
123.1 | 127.4
Cons. | Act.
Rev:
August 4, 2016 2:00PM PST
August 4, 2016 9:00AM EEST
+358-97-5110100 #507694
August 4, 2016 5:00 PM EST
August 8, 2016 5:00 PM EST
August 30, 2016 August 3, 2016 2:00 PM PST
August 8, 2016 5:00 PM EST
August 25, 2016* Estimated Date
August 4, 2016 2:00 PM PST
August 9, 2016 3:00 AM EST
Prelim Rev Est: $104M-$106M
Acquired for $1.45B by
Acquired for $486M by
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Public Company Trading Analysis High Growth & Low Growth Cybersecurity.
Note: NM – Not Meaningful, NA – Not Available; market data as of July 29, 2016; * price performance from IPO price. Source: Capital IQ.
Company Name Stock Price LTM Price
Performance Market Cap
($M) Enterprise Value ($M)
2015-16E Revenue Growth
2016E-17E Revenue Growth
EV / Revenue EV / EBITDA P / E
LTM CY2016 CY2017 LTM CY2016 CY2017 CY2016
High Growth Cybersecurity (>20% CAGR) Palo Alto Networks 130.89 (29.6%) 11,728 11,143 37.7% 31.5% 8.8x 7.0x 5.4x 45.3x 32.4x 22.4x 61.7x Splunk 62.54 (10.6%) 8,310 7,288 34.2% 28.3% 10.0x 8.1x 6.3x NM NM 61.8x NM Fortinet 34.69 (27.3%) 5,955 4,971 26.6% 19.1% 4.3x 3.9x 3.3x 26.3x 21.5x 17.1x 49.6x Proofpoint 75.87 17.3% 3,183 3,127 36.8% 29.0% 10.0x 8.6x 6.7x NM NM 65.6x NM FireEye 17.42 (60.8%) 2,898 2,692 27.3% 25.0% 4.0x 3.4x 2.7x NM NM NM NM CyberArk 56.39 (4.6%) 1,893 1,645 31.1% 22.3% 9.4x 7.8x 6.4x 35.4x 34.4x 27.0x 62.4x Imperva 47.12 (28.3%) 1,520 1,261 19.0% 23.4% 5.1x 4.5x 3.7x NM NM 63.3x NM Secureworks* 14.81 5.8% 1,195 1,071 25.2% 19.6% 3.0x 2.5x 2.1x NM NM NM NM Qualys 31.39 (15.1%) 1,096 890 20.4% 18.9% 5.1x 4.5x 3.8x 14.6x 13.9x 11.4x 39.7x Mimecast* 11.03 10.3% 598 499 20.4% 22.8% 3.5x 3.1x 2.5x 31.5x NM 34.8x NM Rapid7* 13.98 (12.6%) 586 503 37.8% 26.1% 4.1x 3.3x 2.6x NM NM NM NM
Mean 28.8% 24.2% 6.1x 5.2x 4.1x 30.6x 25.5x 37.9x 53.4x
Median 27.3% 23.4% 5.1x 4.5x 3.7x 31.5x 26.9x 30.9x 55.7x Low Growth Cybersecurity (<20% CAGR) Check Point Software 76.88 (4.8%) 13,183 11,856 5.8% 6.1% 7.0x 6.9x 6.5x 12.4x 12.5x 11.8x 17.2x Symantec 20.43 (10.2%) 12,576 8,758 (36.9%) 6.3% 2.4x 2.2x 2.1x 5.8x 7.4x 5.2x 19.2x Trend Micro 38.56 5.2% 5,011 3,787 20.3% 7.6% 3.4x 3.0x 2.8x 10.7x 9.8x 9.0x 27.8x Sophos 3.31 (15.4%) 1,496 1,734 7.4% 14.8% 3.6x 3.4x 3.0x 27.0x 26.3x 22.4x 10.5x AVG Technologies 24.73 (14.0%) 1,255 1,367 2.9% 6.1% 3.2x 3.1x 2.9x 8.8x 8.6x 8.1x 12.9x Barracuda Networks 22.08 (19.5%) 1,151 989 10.6% 6.1% 3.0x 2.9x 2.7x 16.1x 16.0x 14.2x 37.3x VDSI 16.71 (18.0%) 665 529 (12.7%) 13.0% 2.5x 2.5x 2.2x 11.6x 15.9x 11.3x 27.4x F-Secure 3.23 4.0% 503 399 10.3% 5.5% 2.3x 2.3x 2.1x 13.7x 14.2x 11.7x 33.2x Imprivata 19.12 25.8% 484 435 16.6% 16.6% 3.5x 3.1x 2.7x NM NM NM NM MobileIron 3.41 (40.4%) 292 207 8.2% 12.5% 1.3x 1.3x 1.1x NM NM NM NM
Mean 3.2% 9.5% 3.2x 3.1x 2.8x 13.3x 13.8x 11.7x 23.2x
Median 7.8% 7.0% 3.1x 3.0x 2.7x 12.0x 13.4x 11.5x 23.3x
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Overview of Momentum Partners
Momentum Partners Advisors & Dealmakers In Cybersecurity.
Why Momentum Partners? Momentum Partners is a boutique Cybersecurity focused advisory firm based in Silicon Valley with operations globally. We employ a high-touch advisory model specifically designed to serve Founders/CEOs and their Boards – Series A to exit – where we are relentless in our pursuit for better outcomes for clients. As advisors and dealmakers in cybersecurity for two decades, we have closed over 200 deals totaling $200 Billion in value.
Cybersecurity � Enterprise IT � Cloud & SaaS � Defense & Government���
Mergers & Acquisitions* � Capital Raising*������
Corporate Development � Ecosystem Development
Momentum’s Senior Cybersecurity Team Michael Tedesco Executive Chairman Founder Strategic and Capital Markets Advisor to CEOs, Founders & Boards
Eric McAlpine Managing Partner Founder Senior Advisor Cybersecurity Lead
Dino Boukouris Director Strategic Advisor Start-up Advisor VC & Private Equity
Keith Skirbe Director Strategic Advisor Mergers & Acquisitions Deep Cybersecurity Expertise
CLIENT COUNTERPARTY CLIENT COUNTERPARTY CLIENT COUNTERPARTY CLIENT COUNTERPARTY CLIENT COUNTERPARTY
200+ Deals $200+ Billion
Petros Kitsos Senior Advisor Strategic Advisor Direct Investor and Board Member Deep Defense & Aerospace Expertise
Timothy Lipton Partner Founder Start-Up Advisor iCFO
(Rocketdyne)
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CYBERscape: The Cybersecurity Landscape The Security Sector Is Dynamic And Vast. We Are Ceaseless & Vigilant In Our Coverage.
Source: Momentum Partners.
Infrastructure Security Endpoint Security Application Security
Endpoint Prevention WAF & Application Security
Vulnerability Assessment
Network Firewall Network Monitoring/Forensics
Identity & Access Management
Threat Intelligence Mobile Security
Endpoint Detection & Response
Industrial / IoT Security
Fraud Prevention / Transaction Security
Web Security Messaging Security
Specialized Threat Analysis & Protection
Cloud Security
SIEM
Security Incident Response
Security Operations & Incident Response
Risk & Compliance
Data Security
Intrusion Prevention Systems Unified Threat Management
Managed Security Service Provider
18
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Advise. Network. Invest. Momentum Partners, LLC���
Momentum Capital Markets, LLC
340 Brannan Street | Suite 501 San Francisco, California 94107
Michael Tedesco Executive Chairman
Eric McAlpine Managing Partner
Keith Skirbe Director
Dino Boukouris Director
*Securities offered through Momentum Capital Markets, LLC, a division of Financial Telesis Inc. Member FINRA/SIPC.
Petros Kitsos Senior Advisor
Timothy Lipton Partner