Tenable Network Security lands $250M as investors foresee cybersecurity boom

Fast-growing Columbia company Tenable Network Security has received $250 million in venture capital, a massive bet on rapid growth in its business monitoring Fortune 500 and government networks for hacking threats.

It is one of the largest infusions of cash into a cybersecurity company in the country at a time when investors are eager to back such companies. As businesses scramble to protect sensitive data from high-profile hacks and breaches, the industry is expected to grow rapidly.


Tenable is using the money to fund its growth and hire quickly at its Columbia Gateway headquarters and around the world. Eventually, the growth could lead to a public stock offering, CEO Ron Gula said.

As investors pour money into the industry, Gula said he isn't concerned about a cybersecurity bubble.


"I certainly don't think the industry has solved internet security," he said. "I think this market's still very young and this is why we think there's still this massive opportunity."

Tenable's software products continuously watch large data networks, assessing them for vulnerabilities and watching for unusual activity and intruders. Such software is increasingly in demand as major companies make unwanted headlines for data breaches, affecting companies including Target, Home Depot and J.P. Morgan Chase.

The company's 20,000 customers include major firms — the likes of Cisco, MasterCard, BMW, Adidas and Microsoft — as well as U.S. defense agencies, which account for about 20 percent of its business. Tenable was founded in 2002 and employs about 600 people, slightly fewer than half of them in Maryland.

Company officials said Tenable's sales are on pace to hit $100 million annually, declining to give precise figures.

Tenable was looking to raise a round of investment ahead of a possible initial public offering when New York-based Insight Venture Partners approached the company offering most of the hefty investment. The company already had received a $50 million investment from Silicon Valley-based Accel Partners in 2012, and that firm also agreed to double down.

Partners at both firms said they banked on Tenable's future because even at its relatively mature age and large size, it continues to grow rapidly as companies rely on its technology.

"They've built this incredible business without a lot of capital and outside the craziness of Silicon Valley," said Richard Wells, managing director at Insight. "That shows their substance is that much more significant."

Ping Li, a partner at Accel, said in a statement that information security executives at companies around the world "increasingly view Tenable products as the central hub for managing and improving their security posture amidst an ever-worsening threat landscape."

Gula declined to detail how the company plans to use the investment, but said it would go toward growing Tenable's market share domestically and internationally in such countries as China, India and the United Arab Emirates.

Continuing growth eventually could lead to a sale to Wall Street investors or a software giant, Gula said.

"We are really eyeing a public offering, but I can't say when or where," he said. "We're investigating all opportunities, and we're definitely preparing to run a company as if we were public."

Earlier this year, Tenable also received investments from state and Howard County officials aimed at growing the regional economy. It received $1.1 million in conditional loans and grants from the Maryland Department of Business and Economic Development (now known as the state Department of Commerce) and the Howard County Economic Development Authority.


Gula said the company benefits from a flow of technical experts from government agencies who are looking to join the growing cyber private sector, and hopes the company's growth helps boost the state's reputation for its security work force.

"We really want Maryland to be known as a center for cybersecurity, so we think this is a good bet on the region, not just on Tenable," he said.

The investment in Tenable dwarfs what all Maryland companies typically receive in a single quarter combined — investors poured $144 million into the state in the third quarter, up 22 percent from the same period of 2014. That is according to the MoneyTree Report prepared by PriceWaterhouseCoopers LLP and the National Venture Capital Association based on data from Thomson Reuters.

It also stacks up highly among venture capital deals across the country. According to a Dow Jones VentureSource report, the five largest venture capital investments in the U.S. during the first half of the year range from a $300 million investment in consumer electronics company AliphCom to a $1.5 billion infusion into vacation rental company Airbnb.

Software is by far the industry receiving the most attention from investors, with nearly $17 billion in venture capital deals through the first three quarters of the year, according to the MoneyTree report.

And cybersecurity software is a fast-growing segment within that industry. U.S. cybersecurity companies raised a record $1.77 billion last year, according to Dow Jones VentureSource. Other companies that have recently raised large sums include CloudFlare, a website performance and security software startup that raised $110 million, and Tanium, a cyber startup that received $120 million and is valued at $3.5 billion.


Recommended on Baltimore Sun