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Bain, Crosspoint To Buy Cybersecurity Firm ExtraHop For $900M

The private equity money should help network detection and response firm ExtraHop extend the power of its platform to consolidate adjacent markets like intrusion detection, network forensics, and IoT security.

Private equity firms Bain Capital and Crosspoint Capital have agreed to purchase network detection and response vendor ExtraHop for $900 million.

The Seattle-based company said the proposed acquisition should help ExtraHop extend the power of its platform to consolidate adjacent markets like intrusion detection, network forensics, and IoT security. ExtraHop CEO Arif Kareem, CTO Jesse Rothstein, and Chief Customer Officer Raja Mukerji continue in their respective roles with Rothstein and Mukerji remaining significant investors in the company.

“Bain and Crosspoint see a huge opportunity to accelerate and expand the growth in ExtraHop,” Chief Revenue Officer Christopher Lehman told CRN. “ExtraHop has always been a channel-first company, and that’s going to continue.”

[Related: ExtraHop CEO: We‘re Disrupting The Performance Management Space And ’Taking Share’ From NetScout, Riverbed, CA]

With the private equity backing, Lehman said ExtraHop expects to add more channel sales managers and channel sales engineers internationally, as well as additional national and regional sales managers domestically. ExtraHop has historically seen most of its bookings come domestically, but Lehman said the company wants to replicate the success it has seen in Australia over the past three years in additional markets like Japan.

From an awareness standpoint, Lehman said ExtraHop wants to provide more education around the benefits of network detection and response as well as ExtraHop’s technical differentiators to accelerate the sales cycle and time to close. Finally, ExtraHop plans to use the proceeds to build out its managed service provider program to expand both its traditional enterprise strength and into the mid-market.

“By combining our exceptional team, market need, and technology with the deep domain expertise and resources of Bain Capital and Crosspoint Capital, ExtraHop has the opportunity to grow faster and accelerate our innovation to help our customers defend their operations from even the most advanced threats,” Kareem said in a statement.

ExtraHop was founded in 2007, employs 519 people, and has raised $61.6 million in five rounds of outside funding. The company most recently closed a $41 million Series C round led by investment capital firm TCV in May 2014. The $900 million acquisition by Bain and Crosspoint is expected to close this summer.

The company is the third largest player in the network detection and response market, with $91.2 million of revenue and 42.6 percent year over year growth, according to a 2019 IDC market share report. Only Darktrace and Cisco Systems have larger network detection and response (NDR) practices, while ExtraHop’s NDR business is larger than competitors like Vectra, Symantec, LookingGlass and Exabeam, IDC found.

“I was very impressed with the capabilities of ExtraHop in their ability to protect the evolving network as workloads shift to the cloud and networks expand beyond what corporations control,” Crosspoint Capital Managing Partner Greg Clark said in a statement. “When you’re under attack, deep visibility into east-west traffic is vital for modern defense, and ExtraHop has set itself apart in this emerging category with powerful AI and behavior-based analytics.”

Network detection and response is the second fastest growing cybersecurity segment, with a compound annual growth rate (CAGR) of 24 percent, according to ExtraHop. The market is expected to consolidate intrusion detection and prevention systems as well as network forensics to advance the state of network security with artificial intelligence and machine learning, Rothstein and Mukerji wrote in a blog post.

“Bain Capital Private Equity and Crosspoint Capital Partners also believe that ExtraHop has––bar-none––the best-in-class team and the best-in-class product in the NDR market,” Rothstein and Mukerji said. “They see a fast growth path to ubiquity for ExtraHop on the horizon, and they are committed to providing the strategic guidance and support to help us achieve that goal through both organic and inorganic expansion and innovation.”

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