Some news from the Secure Access Service Edge world today as Cato Networks (who also joined us as a speaker on our recent future of networks panel at our recent Cloud Networking Summit – see that here), received a $130M funding round led by Lightspeed Partners. It also added a new investor, Coatue, to its line-up. This brings the total amount of funding it has received to date to $332M
Alongside this funding round Cato Networks has also received a $1bn valuation, which it attributes to business momentum and the industry’s bet on the future of the SASE market. Cato’s focus is entirely SASE which is a gamble that is looking like it may pay off as demand for distributed security has been one of the largest trends coming out of the COVID-19 pandemic.
This latest round of funding leaves Cato with a cash position of over $240m, and this investment as you would expect will primarily be funnelled into expansion of engineering, sales, and marketing with Cato expecting to grow from 270 employees to 385 by the end of 2021.
So, in summary, this is a reasonably large investment in a new market that could be an area of rapid growth if the current network and security trends continue.
When reviewing this news there is one thing it is good to keep in mind. In much of its marketing and technology approaches, Cato is positioning itself as a “leapfrog” technology, which in some situations is an extremely attractive quality. If you aren’t familiar with the phrase, think about the rise of 3G/4G in Africa, many countries there built their initial cellular networks with 3G from the start, as technology had already advanced beyond the need to deploy 2G/GPRS etc.
In Cato’s case, this position assumes there are many companies with an appetite for distributed security and SASE who aren’t already so far along either a Network or Security journey that they will want to “leapfrog” over any further investment in either to proceed with Cato. However, looking at the market, and Cavell’s research on the matter it is easy to see that many large and medium enterprises who are the target for enhanced networking technology are already a few stages into that journey with the existing hardware, contracts, and licenses that requires.
Cato sees its strength coming from its platform and its combination of networking and security, which it believes will allow it to beat out competitors such as telcos deploying a “cobbled together” SASE offering of SD-WAN with security from Zscaler or Palo Alto. It is true that many companies are starting to prefer single stack solutions with multiple features, especially during uncertain times. Yet the reason that this cobbling together happens and is so appealing to enterprises is that this approach often finds a way to incorporate existing investment in a fruitful way. That essentially is both the promise and the risk of Cato’s position in the market, they are offering a fundamental change in approaches to network and security which many companies will be attracted to, but many others may also shy away from.
In the end, going on my instincts, I think Cato Networks is an attractive company. It is well-positioned at the start of a new technology trend, it has an aggressive and knowledgeable sales strategy and marketing team, and the funding to capitalise on both of those to drive growth. The engineer’s I have spoken to that have investigated the platform say that it is technologically sound, and the interfaces are user-friendly as you would expect from a modern networking company. So hopefully they will put this funding to good use, and we will see them with more interesting use cases and customer stories to tell by the end of 2021.
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