Distil Networks Raises $21 M, Plans For Acquisition

August 10, 2016

Distil Networks Inc. is setting cash aside from its latest funding round to make an acquisition in the increasingly consolidating cybersecurity sector.

The company announced $21 million in Series C funding led by Silicon Valley Bank. After acquiring ScrapeSentry earlier this year, Chief Executive Rami Essaid said the company is earmarking $5 million to $10 million to acquire another early stage security company.

This move comes as venture capitalists are expecting more mergers and acquisitions in cybersecurity after the sector has seen some large deals, like Symantec Corp.’s $4.65 billion acquisition of Blue Coat Systems Inc.

Distil Networks uses machine learning and big data to detect bots and protect online data from scraping, a technique hackers use to collect data from websites. Mr. Essaid said the company sees an evolving threat from bots, and increasingly bots are targeting mobile apps and mobile API’s.

Mr. Essaid said he sensed a positive shift in investor sentiment in recent months when raising funding from venture capitalists. Venture investment in cybersecurity startups totaled $830 million in the second quarter vs. $561 million in the first quarter, according to data from Dow Jones VentureSource.

“It was like when all your friends are standing around a pool and no one wants to jump in because they’re afraid the water’s cold,” Mr. Essaid said of the funding environment in the first quarter of 2016. 

Mr. Essaid said he was able to close a round by focusing on how the Series C would bring the company to profitability. He said the company’s valuation doubled with the new round. Though he declined to comment on the exact valuation, data tracker Pitchbook estimated the company’s post-money valuation to be $81 million as of its Series B round.

He said the environment is still tougher on valuations than it was a year ago.

“I thought tripling in revenue would mean we would more than double in value,” Mr. Essaid said. “We came in on low end of my spectrum.”

Existing investors Bessemer Venture Partners, Foundry Group and Techstars also participated in the round. The company has raised $65 million to date.

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