Industrial Security Firm Claroty Raises $140M Round, Last Before IPO

‘We are able to reverse-engineer OT protocols and use them thanks to help from Schneider Electric, Rockwell Automation, and Siemens. These three also use and sell our products. And it’s not just OT, but also IoT and IIoT. We protect everything in the four walls on the industrial side,’ says Claroty CEO Yaniv Vardi.

Claroty, a developer of cybersecurity technology focused on the industrial side of the business, on Thursday unveiled the closing of a new round of funding that will likely be the last one before looking at an IPO.

With the new Series D round of funding, the New York-based company now has amassed a total of $235 million.

Leading this round are two new investors, Bessemer Venture Partners’ Century II fund and 40 North, the investment arm of New York-based global industrial company Standard Industries. Another strategic investor, Korea-based LG, also joined this round. They join other strategic investors in Claroty, including Rockwell Automation, Siemens, and Schneider Electric.

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Claroty is not like most other cybersecurity companies in that it has a focus on the industrial side of the business, said CEO Yaniv Vardi. It works across industrial verticals including automotive, life sciences, food and beverage, and critical infrastructure to protect IoT and industrial IoT, or IIoT, as well as secure remote access, Vardi told CRN.

“The industrial economy is going through digital transformation to become more productive,” he said. “They are taking legacy systems, which were likely air-gapped, and connecting them.”

Claroty’s primary difference is how its research team, most of whom are from elite units of the Israel Defense Forces, partners with leading operations technology, or OT, vendors including some of the company’s investors, Vardi said.

“We are able to reverse-engineer OT protocols and use them thanks to help from Schneider Electric, Rockwell Automation, and Siemens,” he said. “These three also use and sell our products. And it’s not just OT, but also IoT and IIoT. We protect everything in the four walls on the industrial side.”

Vardi cited as an example of a client Pfizer, one of the top COVID-19 vaccine developers. “Pfizer says it protects the world,” he said. “We protect Pfizer.”

Claroty has a large partner ecosystem in addition to the strategic investors who also sell its technology, Vardi said.

It includes services providers such as Deloitte, NTT Data, Accenture, and Kudelski Group, several automation technology developers, and smaller channel partners worldwide. And, for clients looking for IT cybersecurity, Claroty also partners with providers such as Israel-based Check Point Software Technologies and Sunnyvale, Calif.-based CrowdStrike, he said.

The new round of funding will be used to help Claroty both broaden its reach into a wider range of industrial cybersecurity areas such as IoT, and deepen its domain experience, Vardi said.

“For example, identifying IoT devices like smart cameras is easy,” he said. “A lot of companies do that. But we allow the client to double-click and get full visibility of all devices on the network and map the risks, all over the cloud.”

Claroty has not made acquisitions in the past, Vardi said.

“But we are looking to grow and expand,” he said. “We have a roll-up strategy for both new verticals and expertise. For example, we would like to get more IoT capabilities in different verticals.”

Claroty is not actively looking to acquire expertise in IT cybersecurity, but is considering the options, Vardi said.

This new funding round is expected to be the last for Claroty, Vardi said.

“We consider it as a pre-IPO round,” he said. “We don’t expect another round. We are not profitable yet. Instead, we are looking to use proceeds not to grow profitable but to expand significantly into additional verticals and geographies.”