A year after publicly launching in Denver, the fast-growing CyberGRX plans to announce Tuesday that it received $20 million in an investment round led by Silicon Valley’s Bessemer Venture Partners.
The Denver startup, which raised $9 million last year, attributes its momentum to a chore that more companies are required to do: making sure their vendors, suppliers and third-party partners are secure themselves.
The idea is to avoid a repeat of Target’s 2013 credit card data breach, when hackers stole the credentials of an heating and air conditioning vendor to gain access to the retailer’s network. CyberGRX created a place to share threat assessments, saving companies time and effort as they make sure those they let into their network are up to the task.
“We don’t necessarily say these guys are good, but rather, here’s all the information you need to make a decision as to the level of risk you would make,” said Fred Kneip, CyberGRX co-founder and CEO.
The growth caught the attention of Bessemer, one of the oldest venture capital firms in Silicon Valley.
“For an enterprise today, managing cyber risk requires visibility into the extended network of vendors who store information about us,” David Cowan, a partner at Bessemer who will join CyberGRX’s board of directors, said in an email. “The CISO (chief information security officers) we surveyed overwhelmingly look to CyberGRX to help them identify, assess and remediate cyber risks in their extended networks.”
Cybersecurity startups continue to attract investors as last year’s Yahoo user-account breach to the Democratic National Committee security theft kept security in the news. In Colorado, a number of security startups have raised more funding, including ProtectWise in Denver, which raised $25 million, and technology bootcamp SecureSet, which raised $4 million to train more workers for the industry.
According to research firm CB Insights, venture capital firms invested in a record number of cybersecurity startups last year, 279, compared to 272 the prior year and 117 in 2010, reported Bloomberg News.
CyberGRX bubbled up in late 2015 after a group of six chief information security officers realized the redundancy of having to do a new threat assessment for each vendor. Payroll provider ADP, for example, had a staff of 50 people conducting 3,000 assessments a year for its third parties.
ADP became one of CyberGRX’s founding partners and investors, a group that also includes current or former CISOs from health care company Aetna, private equity’s Blackstone, life insurer MassMutual and two other unnamed companies. And now, ADP does just one assessment a year — for itself — and points its vendors to the CyberGRX’s database.
“The original idea is from Jay Leek, the (then) CISO of Blackstone. … He found out that 90 of (115 portfolio companies) used the same payroll services provider. Fifteen were going on site and doing an assessment of the company every year,” Kneip said. “Flying someone to so many locations to review security policies, that’s crazy. Let me do it once and share it on a portfolio. When we talked about it, we thought, ‘Why stop at Blackstone?'”
Leek is now a managing director at ClearSky Security and sits on CyberGRX’s board.
The latest $20 million round for CyberGRX is to accelerate growth by adding employees and customers and building its database, which is “just shy of 100” companies and is expected to be in the thousands by the end of the year, Kneip said.
The company employs about 40 people and plans to add another 25 to 30 this year.
Existing investors included Aetna Ventures, Allegis Capital, Blackstone, ClearSky Power & Technology Fund, GV (formerly Google Ventures), MassMutual Ventures and TenEleven Ventures.
Relax Denver cybersecurity startup CyberGRX hits a nerve, attracts $20 million in round led by Silicon Valley VC stories
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