Industrial cybersecurity startup Dragos raises $200M, valuation soars to $1.7B

Dragos has raised $200 million in Series D funding at a valuation of $1.7 billion. The investment, which Dragos says is also the largest funding round achieved by an industrial cybersecurity firm, was led by Koch Disruptive Technologies and BlackRock.

The funds will be used to accelerate the company’s global expansion and support customers in key growth markets, including electric, oil and gas, chemical, pharmaceutical, food and beverage, water and manufacturing.

“We weren’t trying to raise the Series D round,” CEO Robert Lee told TechCrunch. “What ended up happening was because people realized how important operational technology is, and you’ve got the president talking about it, the investment community woke up to the opportunity.”

Dragos was founded in 2016 to detect and respond to threats facing industrial control systems (ICS), the devices key to the continued operations of power plants, water systems and other critical infrastructure.

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The company’s latest investment — which follows a $110 million in Series C round in December last year — comes at a time of explosive growth for industrial cybersecurity, and a rise in cyberattacks targeting critical infrastructure. In May and June this year, ransomware attacks targeted Colonial Pipeline and the IT network of meat maker JBS, forcing the companies to shut down their industrial operations.

Lee said it’s forcing organizations to reassess the security of their operational technology, or OT.

“All these CEOs and board directors have never not understood that they make money out of OT, but when the pandemic happened, they’re going, ‘Holy crap, we need to do a lot more’,” said Lee. “That’s been driving momentum in a way we couldn’t have predicted.”

Dragos said it saw year-on-year growth of 100% in platform recurring revenue, as well as success on the national security front, fueled by its unique Neighborhood Keeper technology, a visibility solution that shares ICS threat intelligence across industries and geographic regions.

“You’ve seen a giant policy shift with the Biden administration to call out the necessity of ICS,” Lee says.

What’s next for Dragos? Lee tells TechCrunch that the company’s intention is to IPO, though he said it’s by no means an immediate priority for the company.

“What’s right for our customers is to stay long-term independent, and I don’t see how anything other than an IPO once you’ve taken venture capital keeps you independent,” he says. “We’ve had all the multibillion-dollar acquisition offers along the way, but if my son is going to have lights and water when he grows up, it’s going to be based on us being independent long term.”