Menlo Security CEO Says $100M Series E Could Be Last Funding Before IPO

Menlo Security said Thursday that it has raised $100 million in a Series E round of funding.

Vista Equity Partners led the round, which included participation from Neuberger Berman funds, JP Morgan, General Catalyst and additional existing investors.

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Menlo Security most recently raised a $75 million Series D funding round in July 2019. The new round brings its total funding to more than $260 million and its valuation to $800 million.

CEO Amir Ben-Efraim told Crunchbase News he wants to keep the Mountain View, California-based company independent and he’s hopeful the Series E raise will be the company’s last funding before going public.

The new funding will also be used to expand the company’s product organization and accelerate its go-to-market initiatives, Ben-Efraim said. 

Menlo Security will also grow its sales team, he said. The company, which has about 270 employees now, expects to grow its workforce by 30 percent to 50 percent. 

With many people still working from home because of the COVID-19 pandemic, companies have turned their attention to security needs that come with remote work. And funding data available shows that security is top of mind for investors this year, too.

According to Crunchbase data, funding for cloud security, cybersecurity and network security has reached $5.5 billion for companies based in the United States so far in 2020. The $5.5 billion figure, across 273 deals, is up from $4.7 billion raised across 351 deals in all of 2019. 

So far in 2020, security venture funding for U.S.-based companies has surpassed levels for the past five years.

2020 has been a record year for cybersecurity in particular, according to Eric McAlpine, founder and managing partner at cybersecurity advisory firm Momentum Cyber.

“Cybersecurity fund raising in 2020 has been unprecedented,” McAlpine told Crunchbase News via email. “A global pandemic would seemingly have a major negative impact on capital raising across the industry, however, it has had the exact opposite effect.”

Drivers of the accelerated pace of funding for cyber companies include the expanding attack surface due to the mass work-from-home movement, the continued digitization of the global economy and the increasing need for tools such as zero trust networks and cloud access security broker software, he said.

Menlo Security has certainly seen some of the demand for increased security. The company said its ARR grew 155 percent this year while average deal size is up more than 100 percent over the same period last year.

The work-from-home era has heightened two major challenges when it comes to security, according to Ben-Efraim. Many remote workers connect over slow VPN connections and in some cases, VPN connections are overwhelmed, making it a challenge for workers to do their jobs. Another major challenge has been a rise in malware. Anytime there’s systemic disruption, as with a pandemic, bad actors tend to jump in and take advantage of the confusion, he said.

“At a super high level, the way we solve that is we’re a cloud-based security service so our protection umbrella, if you will, serves you no matter where you are,” he said.

The security sector has seen an increase in demand during the pandemic because attacks are on the rise and security is critical for enterprises, according to Ben-Efraim.

“In today’s dynamic threat landscape with the rapid growth in connected devices, simultaneous decentralized network structures, and the widespread embrace of SaaS and cloud-based applications, providing a safe internet experience is more important and challenging than ever before,” Ryan Atlas, managing director of Vista Equity Partners, said in a statement.

Illustration: Dom Guzman