Cybersecurity vendor Darktrace has announced that it closed 2016 with customer orders at a new high. The company has now banked over $125 million since it was founded three years ago. Its year on year revenue growth stands at an impressive 6 times. The company also says that customer renewals are at over at 90%. This figure is based on its early customers who are just coming up for their first three year contract renewal. However, given their growth rate we would have expected this to be much higher.
Nicole Eagan, CEO, Darktrace said: “Our outstanding growth this quarter reflects the huge demand for Darktrace’s self-learning solution, which is the only technology that is capable of catching in-progress attacks, without prior warning or special insights. Organizations of all sizes across the world are deploying the Enterprise Immune System to defend against not just today’s cyber-threats, but tomorrow’s too.”
What does Darktrace do?
Darktrace describes its solution as being an Enterprise Immune System. It is a machine learning cybersecurity solution that sits on the network monitoring what users, applications and devices are doing. Unlike other vendors who do profiling, Darktrace is using a range of mathematical and other technologies to gather the data. It looks at how an employee engages with their local devices, the way they navigate applications and the type of data they access. Building a profile takes several weeks as the Darktrace software increases its understanding of that user.
One of the advantages of this approach is that it enables users to change devices and for Darktrace to track them. This is also an on-premises solution with no data being exfiltrated back into the cloud. Darktrace says that this is to enable it to meet the demands of data regulators.
The problem of attracting machine learning staff
The growth in new business has also seen the company double its employee count. This highlights a serious challenge for Darktrace going forward. They are competing with larger companies with deeper pockets for the same machine learning experts. This means that they will have to look at internal training and education of staff. The company already has its own programme for educating staff, the question is whether it is enough.
It also has an active approach to employing ex-servicemen and women. This approach to employing service personnel means that they start with employees who have an understanding of security.
Is this growth enough for Darktrace to stay independent?
The security industry has seen more new entrants than virtually any other market segment. There are now over 300 companies selling cyber security products to enterprise customers. Many of these are start-up companies target specific security issues. This creates a challenge for enterprise customers who have to either buy lots of very good point solutions or rely on traditional security platforms.
This announcement of rapid growth and its use and experience of machine learning means that Darktrace is an acquisition target. This week Clearlake Capital funded the acquisition of LANDESK which it is merging with HEAT Software. Will they stop there? Darktrace would provide another tool for them to secure the endpoint and drive them into much larger enterprises. It is also possible that one of the more established security vendors might look at Darktrace to boost its machine learning skills.
Rapid growth in cybersecurity companies is nothing new. Growth of 6x however is a moment where people are likely to sit up and take notice of you. This is good news for Darktrace and its staff but it needs to prove it can continue that growth into 2017. It also needs to address customer churn. When your original customers are moving away at the end of their contract you need to ask why. It suggest that Darktrace needs to look more closely at its customer retention issues before they become a problem.