"The Information" has exposed some of the most overvalued cybersecurity startups that raised money last year, including Israeli companies Wiz, Snyk and Axonius. Using previously undisclosed revenue figures, the US technology publication calculated how the companies' valuations massively exceeded their forward revenue with multiples of up to 150, for the Israeli companies.
Wiz, for example, tripled its value, in just over six months, and raised capital at a valuation of $6 billion, while Snyk increased its valuation from a little over $1 billion at the start of the Covid pandemic, to $8.5 billion at the end of 2021.
Wiz: A multiple of 150 on revenue
According to "The Information," the annual revenue of cloud server security company Wiz, led by cofounder and CEO Assaf Rappaport, was about $40 million, when it closed its most recent financing round at the end of 2021. This revenue gives the company a multiple of 150 on its valuation, a fantastic multiple, certainly by Wiz's valuation today.
Publicly traded cybersecurity companies shone at the end of 2021, when, for example, Israeli cybersecurity company SentinelOne (NYSE: S), which today has a market cap of $7.167 billion, was then worth $13.3 billion. SentinelOne had revenue of $200 million, giving it a multiple of 28 on its annual revenue. CrowdStrike has a multiple of 30.
Wiz is undoubtedly an Israeli phenomenon. A company that reportedly has the biggest growth in revenue in Israeli industry and if this this trend continues, it is reasonable to assume that Wiz can raise its valuation and enjoy the slowdown in its rivals who are being less successful. But it is not certain that it can achieve this with the same multiples as 2021.
Axonius: A multiple of 87 on revenue
Axonius's annual recurring revenue (ARR) as of March 2022 was $30 million, which when it closed a $100 million financing round at a company valuation of $2.6 billion, after money, reflected a multiple of 87 between revenue and valuation. Since then, Axonius's annual revenue has crossed the $50 million threshold, and 2021 annual revenue reportedly grew 2.5 times.
Axonius, which was selected as one of "Globes" ten most promising startups for 2020, was founded by three graduates of the IDF's 8200 Intelligence Unit Ofri Shur, Dean Sysman and Avidor Bartov, who met during their army service. Axonius competes with Israeli company Armis in protecting network connected computers. While Armis scans the network traffic of an organization in order to identify connected devices during real time, Axonius connects to various data systems and monitors threats from the data connecting to them.
Snyk: A multiple of 85 on revenue
The privately-held Israeli cybersecurity company with the highest valuation is Snyk, and there is a good reason for this. According to "The Information," annual revenue at the time of the company's last financing round in January, which was led by Tiger Global, was $100 million. The financing round was completed at a valuation of $8.5 billion, thus giving the company a multiple of 85. In 2020, Snyk had revenue of $40 million, meaning that revenue increased impressively 2.5 times last year.
Snyk has developed a system to detect security flaws and licensing violations in code and corrects them based on a data bank of vulnerabilities. The system, is also able to learn from reports of defects, vulnerabilities and breaches by program developers and improve through machine learning technology. This allows developers and DevOps teams to ensure that the code they are writing is secure and operating correctly without disrupting their ongoing work.
Snyk was founded in 2015 by president Guy Podjarny, who had previously founded and sold website performance company Blaze to Akamai, together with Assaf Hefetz and Danny Grander. Snyk examined the option of an IPO but at a much higher valuation than it received in January. The recent bear market led it to postpone its plans for the time being.
Published by Globes, Israel business news - en.globes.co.il - on June 9, 2022.
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