The CEO of Deep Instinct, which just raised $43 million, explains why he he's committed to a cybersecurity IPO instead of selling out

Deep Instinct

Deep Instinct CEO and co-founder Guy Caspi

• On Wednesday, cybersecurity startup Deep Instinct announced it raised $43 million in series C funding.
• Deep Instinct uses "deep learning," a branch of artificial intelligence that creates computer programs to work similarly to human brains, to prevent attacks.
• Despite the trend of cybersecurity startups selling themselves to big companies, Deep Instinct CEO and co-founder Guy Caspi says he plans for Deep Instinct to go down the IPO path - and he says he's even turned down a few acquisition offers.
• Visit Business Insider's homepage for more stories.

Last year, the cybersecurity industry saw plenty of M&A activity in the industry, such as BlackBerry's acquisition of Cylance, Broadcom's acquisition of Symantec's enterprise security business, and VMware's acquisition of Carbon Black.

But Deep Instinct CEO and co-founder Guy Caspi says he wants his startup to go down a different route. While many of the traditional cybersecurity companies couldn't survive and address new challenges, Deep Instinct focuses on stopping attacks before they happen. Previously, he says the security market mostly focused on reacting to attacks.

"Most of the endpoint players have been acquired," Caspi told Business Insider. "The reason for that is most of these technologies have been lagging behind the threat landscape and couldn't address the new challenges in the market."

Caspi says Deep Instinct had already turned down a few acquisition offers, but he plans for the company to eventually go public. To help it get there, Deep Instinct announced Wednesday that it raised $43 million in series C funding led by Millennium New Horizons.

With the funding, Deep Instinct plans to grow the company in sales, marketing, and hiring. Right now it has about 150 people, and it plans to recruit an additional 100 people.

'Detection is not enough'

Deep Instinct was founded about five years ago by Caspi, CTO Nadav Maman, and chief scientist Eli David, who all come from cybersecurity backgrounds. Today it now has several products for securing phones, operating systems, and computer networks.

And about three years ago, Deep Instinct participated in an NVIDIA artificial intelligence startup competition and won the "Most Disruptive Startup" award. This helped it get funding from NVIDIA, which also participated in this round of funding. Likewise, it caught the attention of HP, LG Technology Ventures, and Samsung, which also invested.

"You still need to prevent more threats in the organization," Caspi says. "In some of the cases like ransomware, detection is not enough. The network is already infected. In ransomware, these are like terror attacks."

To identify and stop attacks, Deep Instinct uses deep learning, a field of machine learning that allows a computer program to imitate how a human brain works to learn and identify patterns.

"We noticed the problem and what is happening in the security market to combine this very unique AI and deep learning know-how together with security," Caspi says. "We do both offensive and defensive. We know what is missing in the market."

Currently, Deep Instinct competes with traditional players like Symantec, Trend Micro, and McAfee, as well as newer players like Cylance and CrowdStrike. But Caspi says Deep Instinct is better at predicting attacks.

"When we came, the current approach of detection and response is also losing confidence as the landscape is escalating," he says.

'It was not easy for us as founders to say no to an M&A a few times'

Last year was a turning point for the cybersecurity market, Caspi says, when companies started focusing more on prevention. Still, it was difficult to convince the market two to three years ago, he says.

"I think the main challenge for us as a company and the last two to three years was to convince the market that prevention is possible and the approach of detection with a very successful IPO of CrowdStrike just last year," Caspi said. "It was not easy."

Caspi says he has "no doubt" that Deep Instinct wants to take the IPO track although it's still early and there's no planned date.

Deep Instinct does not disclose its financials, and Caspi says only that the five-year-old company's revenue is comparable to that of an eight or nine year old cybersecurity company. While Deep Instinct received offers for funding from other technology companies and investors, it didn't need the money because of funding from existing investors and its revenue, Caspi says.

"We are there on the trajectory in terms of customer acquisitions, the numbers, the financial metrics," Caspi says. "We just need more time to accelerate the business. We're going to get there with this unique technology."

And with some notable exceptions like CrowdStrike and Zscaler, cybersecurity startups often reach an exit by getting acquired.

"It was not easy for us as founders to say no to an M&A a few times," Caspi says. "The founders and also the shareholders are really super aligned in the fact that this company is going to IPO and I think the market is there. When you speak with bankers and the Goldman Sachs and J.P. Morgans of the world, they all tell us they are missing good cybersecurity IPOs."

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