Illumio, a specialist in segmented security, raises $125M at $1b+ valuation

Another day, another major round of funding for a security startup, underscoring just how active the area of IT protection is right now — both in terms of business need and as an investment opportunity. Today, Illumio — a startup that provides data center and cloud security services, monitoring and protecting individual applications and processes within an enterprise network by segmenting them — is announcing that it has raised $125 million in a new round of funding. It plans to use the money to expand in three areas, business development, R&D and customer support.

The Series D was led by J.P. Morgan Asset Management. (J.P. Morgan also happens to be a customer, although this deal was made independent of that, Andrew Rubin, the CEO and co-founder of Illumio, told me in an interview.) Other big names in this round included Andreessen Horowitz, General Catalyst, 8VC, Accel, Data Collective and Yahoo’s Jerry Yang — all previous investors — as well as unnamed new backers.

It brings the total raised by Illumio to $267 million, at what Rubin described as an upround: “The pre-money on this was higher than on the last, no ambiguity about that,” he said in an interview.

To be clear, Illumio has never commented to me about its valuation. But, for those who are interested in keeping tabs… it was widely reported during its Series C round of $100 million in 2015 that Illumio was valued at $1 billion, meaning the valuation is very likely well over that figure by now. 

“We are determined to build a long term, successful, standalone and potentially public company,” Rubin explained to me earlier this week. “The specific numbers don’t mean anything unless we are growing.”

But the company has, indeed, been doing just that. Illumio is not disclosing its revenues and Rubin noted that it is not yet profitable, but there are other signs of how things are moving. Bookings were up 400 percent between its first and second years of business (it’s been in the market for 2.5 years, so no figures yet for how years two to three have gone).

Customers include nine of the 15 largest financial companies in the U.S. as well as four of the seven largest SaaS businesses — “with a considerable number of seven-figure deals,” Rubin added. Salesforce, Workday, games company King, Netsuite and Morgan Stanley are all among Illumio’s clients.

With a focus on large enterprises, Illumio’s business is based around volume plays: multiple customers, it says, segment and secure 10,000 workloads in a typical Illumio deployment. One recently secured 32,000 workloads.

We have described exactly what Illumio does in some detail before, but here is a slightly more abbreviated explanation:

While there are firewalls and a number of other cross-network security options, the idea behind Illumio is that by segmenting workloads, it’s able to manage them and potential breaches better, and in cases where something bad has gotten through, contain them better to prevent a cascading or ripple effect.

“Think of your network as a submarine,” Rubin explained. “If the submarine springs a leak, you want to avoid the whole thing sinking. This is what we do for our customers. If something does go wrong, we reduce the impact.”

The second thing that Illumio provides, in addition to the detailed protection, is a big-picture snapshot of what the whole network is doing, which the company likes to refer to as a “network MRI”, in order to identify where problems may lurk.

The other important thing is how Illumio has built its solution. “What Illumio has done is substituted a software brain for tasks that used to be done by humans,” CCO Alan Cohen said. Part of the shift to machines and AI to do this is because of the sheer growth of computing in business. “We track every application and do it at large scale. To be able to map that in a data center today, you can’t do that with humans anymore.”

The approach that Illumio takes may have been somewhat unique when the company first launched, but these days there are more competitors on the market, including big names like VMWare and Cisco, which both have an obvious interest in developing similar services, given their respective holdings in virtualised machine technology and servers.

In that regard, one of Illumio’s unique selling points is that it has stayed very much as an agnostic provider in the mix.

“I continue to be inspired by Illumio’s vision for transforming the cybersecurity market,” said John Thompson, an Illumio board member who happens also to be chairman of Microsoft. “Illumio’s experienced management team has been executing on this enormous opportunity with conviction. The company’s advantages against the incumbents continue to reinforce that Illumiowill define this new data center and cloud security market.”

That has also continued to have strong resonance with investors, and specifically customers who have become backers.

“Given the exponential growth of cybersecurity risks, it’s clear that segmentation is now one of the largest market opportunities in enterprise software,” said Larry Unrein, Global Head of J.P. Morgan Asset Management’s Private Equity Group, in a statement. “Through our due diligence process, which included speaking with a number of Illumio’s key customers, we learned the company’s adaptive segmentation technology is designed to address these threats and offers a range of options without all of the manual work normally associated with traditional segmentation solutions.”