More funding for AI cybersecurity: Darktrace raises $75M at an $825M valuation

With cybercrime projected to reap some $6 trillion in damages by 2021, and businesses likely to invest around $1 trillion over the next five years to try to mitigate that, we’re seeing a rise of startups that are building innovative ways to combat malicious hackers.

In the latest development, Darktrace — a cybersecurity firm that uses machine learning to detect and stop attacks — has raised $75 million, giving the startup a post-money valuation of $825 million, on the back of a strong business: the company said it has a total contract value of $200 million, 3,000 global customers and has grown 140 percent in the last year.

The funding will be used to expand the company’s business operations into more markets. Notably, Darktrace also separately announced today that it is now in a strategic partnership with Hong Kong-based CITIC Telecom CPC, a telecoms firm serving China and other parts of Asia, “to bring next-generation cyber defense to businesses across Asia Pacific.”

We have confirmed that CITIC, which owns the strategic partner, is not investing as part of this partnership. “CITIC CPC is not an investor,” a spokesperson for Darktrace confirmed. “It was a Darktrace customer and, impressed by the fundamental power of the AI technology, decided to enter into a strategic partnership to expand its reach.” Other telcos that work with Darktrace include BT in the UK and Australia’s Telstra.

This latest round, a Series D, was led by Insight Venture Partners, with existing investors Summit Partners, KKR and TenEleven Ventures also participating. Darktrace — which is also backed by Autonomy’s Mike Lynch — was founded in the UK and now is co-based in Cambridge and San Francisco. This round of funding brings the total raised by Darktrace to just under $180 million.

IT security has been around for as long as we have even had a concept of IT, but a wave of new threats — such as polymorphic malware that changes profile as it attacks — plus the ubiquity of networked and cloud-based services, has rendered many of the legacy antivirus and other systems obsolete, simply unable to cope with what’s being thrown at organisations and the individuals that are a part of them.

Darktrace is part of the new guard of firms that are built around the concept of using artificial intelligence both to help security specialists identify and stop malicious attacks, as well as act on their own to automatically detect and stop the threats.

Other security startups built on using AI include Hexadite — acquired by Microsoft for around $100 million last month — which, like Darktrace, works in the area of “remediation” by both identifying and relaying information about attacks to specialists, as well as stopping some itself; Crowdstrike, which raised a large round of funding in May at a billion-dollar valuation; Cylance, also valued at more than $1 billion; Harvest AI, which Amazon quietly acquired last year; and Illumio, a provider of segmented security solutions that raised $125 million earlier this year.

Darktrace’s system is based on an appliance it calls the “Enterprise Immune System” that, as we have noted before, sits on a company’s network and listens to what’s going on. The “immune system” in its name is a reference to the immune system of humans, which (when healthy) develops immunity to viruses by being exposed to them in small doses. Darktrace’s system is designed to identify malicious activity in a network. It alerts IT managers when there is suspicious behavior. It is also designed to take immediate action to stop or at least slow down an attack until more help is at hand.

That has proven to be an attractive idea to investors, as seen by the hundreds of millions that have been ploughed into this area already.

“Insight Venture Partners has a proven record of partnering with tech-focused firms, and its backing of Darktrace is another strong validation of the fundamental and differentiated technology that the Enterprise Immune System represents,” said Nicole Eagan, CEO at Darktrace, in a statement. “It marks another critical milestone for the company as we experience unprecedented growth in the U.S. market and are rapidly expanding across Latin America and Asia Pacific in particular, as organizations are increasingly turning to our AI approach to enhance their resilience to cyber-attackers.”

“In just four years, Darktrace has established itself as a world leader in AI-powered security,” said Jeff Horing, Managing Director at Insight Venture Partners. “Insight is proud to partner with Darktrace to continue to drive its strong growth and superior product market fit.”

It’s interesting to see Darktrace moving into China: the country has been identified numerous times as one of the main origination points of cyberattacks on Western firms, but what doesn’t get reported much is that enterprises in China are also subject to the same problems.

CITIC Telecom CPC said that Asia Pacific businesses are “battling fierce attacks on a daily basis.”

“As we have seen from the headlines, humans are consistently outpaced by increasingly automated threats, organizations increasingly recognize that traditional defenses focussed on past threats only provide the most essential protection,” said Daniel Kwong, Senior Vice President, Information Technology and Security Services at CITIC Telecom CPC. “Companies in Asia Pacific need a new approach to remain resilient in the face of brazen, never-seen-before advanced attacks.”

With Darktrace’s machine learning approach, having a presence in China and working with a network provider in the region could see the company gain new kinds of insights into the larger global threat, subsequently passing on that benefit to other Darktrace users globally.

Updated with more investment detail from Darktrace.