Goldman, Amazon and Vista Equity back cyber security start-ups

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Two cyber security companies focused on keeping information safe in the cloud have signed up new investors, with Vista Equity Partners buying Ping Identity and Amazon and Goldman Sachs becoming equity holders in Ionic Security.

Ping Identity, which had said it was planning an initial public offering for 2017, was bought by the private equity firm for an undisclosed sum. The company tries to ensure only the right people in an organisation can access sensitive data.

Ionic, which announced a new $45m fundraising round, is able to encrypt data in a way that allows companies to protect it wherever it sits, allowing businesses to monitor it as it flows from server to server across the web.

Amazon is becoming an equity holder in Ionic via a partnership that will also allow customers of Amazon Web Services, its fast-growing cloud data centre business, to use Ionic’s technology to secure data in the cloud and on their own on-premise servers.

Andre Durand, chief executive of Ping Identity, said it had become “a lot harder” in the past five years for businesses to be sure who had access to sensitive information, as data flit between cloud servers and mobile phones.

As the cyber security industry has seen a slowdown in funding after a couple of heady years, he said it was a “pretty advantageous time” to buy such bolt-ons.

Vista Equity Partners has been an active dealmaker in recent months. It bought Marketo, a marketing technology company, for $1.8bn this week and participated in a bidding battle for internet company Yahoo, alongside Bain Capital and some former Yahoo executives.

Last year, Vista sold its majority stake in cyber security company Websense to defence contractor Raytheon to create a joint venture, almost doubling its valuation in less than two years after it took the company private.

“Vista doesn’t buy ‘unicorns’ burning a lot of cash,” said Mr Durand.

Ping Identity says it is on track for annual recurring revenue of $100m this year.

Ionic Security raised $45m last year in a round led by hedge fund Hayman Capital, with contributions from existing investors including Google Ventures and Kleiner Perkins, the venture capital firm. It has raised a total of $122m and will use the funds to expand beyond selling to large companies.

This will include tapping into AWS’s growing customer base. Sales at the Amazon’s data centre unit soared 64 per cent in the first quarter of 2016 to $2.6bn. This comes as companies ranging from Silicon Valley start-ups to multinationals choose to host more of their operations in the cloud.

Adam Ghetti, chief executive of Ionic Security, said the company had already seen “tremendous interest” in its partnership with AWS in Europe.

Companies on the continent have become increasingly nervous about which country has sovereignty over their data since leaks by Edward Snowden, a former contractor to the US National Security Agency, exposed a mass surveillance programme in 2013.

Mr Ghetti said Ionic wants to ensure “data can be secure, private and easily managed. . . regardless of its location”.

Goldman Sachs was one of the start-up’s earliest customers when it began using its product in 2014.

Ward Waltemath, managing director in the TMT group at Goldman Sachs’ investing banking business, said the company’s platform addresses “one of the biggest unsolved security problems for large enterprises today”.

Ionic is the first cyber security company Amazon has invested in.

Stephen Schmidt, vice-president, security engineering and chief information security officer for Amazon Web Services, said the purpose of the partnership was to allow any organisation, whatever their size, the high-level data protection usually only used by sophisticated companies and government agencies.

Terms of the investments were not disclosed.

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