2017 IPO Prospects: ForeScout Files “Confidentially”

Last year, only 40 VC-backed US startups went public. This was the lowest number since 2009. The volatile public market at the beginning of the year forced several startups to delay their IPO plans. One of them was cyber security Billion Dollar Unicorn ForeScout. But it has recently filed confidentially for an IPO. 

ForeScout’s Offerings

Campbell, California-based ForeScout was founded in 2000 by Israeli entrepreneurs Oded Comay, Doron Shikmoni, Hezy Yeshurun, and Dror Comay. It offers a unique platform that allows organizations to see devices, including non-traditional devices such as Internet of Things (IoT) devices and Bring Your Own Device (BYOD) endpoints, when they connect to the network.

Its proprietary ForeScout CounterACT platform allows them to manage these devices’ information sharing and operations and accelerate incident response. It continuously scans the network and monitors the activity of every device and instead of just flagging violations and alerting the IT team, CounterACT allows organizations to automate and enforce a comprehensive range of policy-based controls for network access, endpoint compliance, and mobile device security.

Unlike traditional security solutions, CounterACT does not require any software installation or previous device knowledge to enforce security. It is able to integrate with other network, security, mobility, and IT management products to ensure that security is not delivered in silos. It automates workflows and enables cost savings.

ForeScout recently announced an integrated tool in collaboration with Splunk to bring a new level of security visibility to IoT devices. Called The ForeScout Extended Module for Splunk, the new tool allows two-way communication between the ForeScout CounterACT tool and Splunk Enterprise or Splunk Enterprise Security (Splunk ES) so as to find issues faster and minimize possible damage.

ForeScout’s Financials

Last month, ForeScout filed confidentially for an IPO and it is likely to go public in the next few months. It has submitted its S-1 under the JOBS Act and will be unveiling it to the public closer to its debut.

It had earlier revealed that it has seen growth rates of more than 50% annually since 2012. In fiscal 2015, it earned $126 million in revenues, with 147% revenue growth over three years. As of September 2016, it had over 2,200 customers spread across 60 countries and over 700 employees.

It has been venture funded so far with $121 million raised from investors including Wellington Management, Accel, Amadeus Capital Partners, Aspect Ventures, Cross Creek Advisors, Founders Circle Capital, ITOCHU Corporation, Meritech Capital Partners, and Pitango Venture Capital. Its last round was held in January 2016 when it raised $76 million in a round led by Wellington Management that valued it at $1 billion. A year earlier, it was valued at $257 million in a $30 million round.

Several cyber security startups including Okta, Tanium, Optiv, and Carbon Black are lined up for IPOs. The ones that have already gone public are trading below their IPO prices. FireEye (NASDAQ: FEYE) went public in 2013 at an IPO price of $20, but is now trading at $11 with a market cap of $1.92 billion. SecureWorks (NASDAQ: SCWX), went public in April 2016 at an IPO price of $14 and is currently trading at $10.46 with a market cap of $844 million.

SecureWorks’ dismal IPO was what forced ForeScout and other cyber security firms to re-evaluate their IPO plans in 2016. The cyber security industry has attracted much funding in recent years, but now the focus has turned to profitability. Investors are also getting itchy about exits in some cases where they’ve been in for a long time.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

Photo Credit: Blue Coat Photos/Flickr.com

This segment is a part in the series : 2017 IPO Prospects