The Hustle

Palo Alto Networks acquires rival cybersecurity startup Demisto for $560m

Cybersecurity giant Palo Alto Networks acquired its smaller rival Demisto for $560m.

February 20, 2019

Palo Alto Networks (PAN), a California-based cybersecurity giant, acquired its smaller rival Demisto for $560m to streamline its own cybersecurity products. 

But the real winner here is Demisto: The 3-year-old company had only raised a total of $69m to date, giving its few early investors a plush return.

Yep, the cybersecurity industry is still red hot

Since the cybersecurity industry is expected to balloon to more than $300B by 2024, dozens of startups have launched with ambitious goals to tackle enterprise cybersecurity problems.

Palo Alto Networks has emerged as one of the bigger players in that landscape: Prior to the purchase of Demisto, the company sat on $3B in cash and liquid assets. 

Now, Palo Alto Networks hopes to apply Demisto’s automation expertise to its existing systems and expand its client base by adding Demisto’s 150 clients (25% of whom are Fortune 500) to its roster.

For Demisto and its investors, it’s either a big win or a huge win

When Demisto last raised money — a $43m Series C this past October — it was valued at just $218m, meaning the company doubled in value in about 4 months.

Since Demisto had very few early investors, the companies that did have the gumption to invest in the young company made off like bandits in this acquisition.

But, financially speaking, it’s not a bad deal for Palo Alto Networks: In the past 3 months, the company’s stock has risen more than 40%, and it inched even higher yesterday after it announced the acquisition. 

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