Shlomo Kramer, co-founder of renowned cybersecurity firms Check Point and Imperva, has raised $238 million for his latest venture, Cato Networks. The funding round, which took place on Wednesday, was led by Lightspeed Venture Partners, a major investor from Cato's 2021 round. This recent investment has pushed the Tel Aviv-based company's valuation to $3.1 billion, up from its $2.5 billion valuation during the Series F round.
Cato Networks competes in the Secure Access Service Edge (SASE) market and is known for its pioneering work in this cybersecurity segment. Its cloud software stack offers specialized tools for securing online access and web traffic, in addition to providing firewall protection as a service.
The SASE market is expected to surpass $9 billion with nearly 40% growth in 2023, according to Gartner (NYSE:IT). Kramer estimates that the overall market where Cato operates could reach $20 billion and is focusing on growth across multiple dimensions. However, despite its success, Cato Networks remains relatively small compared to other security startups such as Wiz, valued at $10 billion earlier this year.
In Gartner's inaugural "Magic Quadrant" chart of notable SASE providers, Palo Alto Networks (NASDAQ:PANW) was named a "leader," while Cato Networks was listed among several "challengers." Kramer contends that his company outperforms Palo Alto and other competitors in customer competitions around 70% of the time.
Despite this claim, Palo Alto Networks maintains a significant lead with a market cap over $73 billion, greatly overshadowing Cato's recent valuation. Other investors in Cato's latest funding round included Adams Street Partners, Singtel Innov8, Sixty Degree Capital, and SoftBank (TYO:9984) Vision Fund 2.
Kramer previously served on the board of directors at Palo Alto Networks and has made significant personal investments in the company. He aims to close the gap with his former colleagues and is looking forward to taking Cato Networks public in 2024, following the successful IPOs of Check Point and Imperva.
Cato Networks' gross margins currently stand at 70% for its software and are improving, with annual recurring revenue exceeding $100 million. Kramer believes that the company's cautious approach to valuation will benefit shareholders when it goes public. His ultimate ambition is to simplify security for everyone by making enterprise-grade tools universally available.
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