The firm I work for has a fund-of-funds business — we invest in what we believe are the very best venture capital firms. We have reasonable insights into fund performance: who is driving returns, and which sector is successful. Market perception, however, is driving by people who are the loudest, by content, and by marketing. That is not different for VC firms.
In February 2018, I did a little survey of 64 CEOs, CISOs, and other cybersecurity professionals I know. I asked a simple question:
“Which two venture capital firms come to mind when you think about the most successful cybersecurity investors?”
Mind you, I did not ask about smartest people, good advice, best platform, most help, or great insights. I asked about success of the investors. Now, you can define success in various ways. I was curious what the answer would tell me about “success”.
That was somewhat a surprise. Not only the firm names, but that there was no clear “winner”, and 16 common mentions for A16Z out of n=64 does not signal overwhelming conviction. Some people very astutely recognized that great firms of the past might not be the same great firms of the future, given the changes in the ecosystem. Here are some publicly available data points from PitchBook:
- A16Z is a prolific investor and a phenomenal platform. But the funds are relatively young, and most notably exits that could qualify as cybersecurity in a broader sense are Okta (Nasdaq: OKTA at about $1,542m IPO valuation), Silver Tail Systems (bought by Dell EMC for about $350m), and most recently CoreOS (acquired by Red Hat for about $250m).
- Trident has made many cybersecurity investments, but most notable exits were Prolexic (bought by Akamai for about $409m), SilverSky (bought by BEA for about $232m), and Solera (bought by Blue Coat Systems for about $225m).
- Lightspeed has a deeper track record, with Sailpoint (NYSE:SAIL at about $1,027m IPO valuation), MobileIron (Nasdaq:MOBL at about $672m IPO valuation), or perhaps Masergy (LBO/Buyout by Berkshire Partners for about $900m), and ZScaler filed for an IPO earlier this year.
- Bessemer’s Lifelock (NYSE:LOCK) was acquired in February 2017 by Symantic for $2,300m, and hopefully Bessemer was still holding some stock then. They also invested in Tripwire (acquired by Belden for about $710m), Cofense (estimated $400m buyout by Pamplona Capital Management), and Good Technology (acquired for $425m by Black Berry in November 2015)
- Foundation Capital invested, amongst others, in Phantom Cyber (estimated $350m to Splunk), Skycure ($275 to Symantec), MobileIron ($672m IPO), Coverty ($375m to Synopsys).
- Sutter Hill was most notably investor in OpenDNS ($635m to Cisco).
- .406 Ventures was most notably investor in Veracode ($614m to CA Technologies).
- Khosla Ventures was investor in Okta (estimated $1,543m IPO).
- Ten Eleven venture is so young that it only had one exit so far, Hexadite, selling for about $100m to Microsoft.
Tomorrow I’ll dive into actual data of meaningful exits over the past ten years: exits with outcomes greater than $500m.