Cato Networks has added $77 million to its war chest as it takes on the large telcos and other service providers in the SD-WAN sector. With the latest round of funding, Tel Aviv, Israel-based Cato Networks has raised a total of $200 million.
The investment round was led Lightspeed Venture Partners along with participation from Aspect Ventures, Greylock Partners, Singtel Innov8, U.S. Venture Partners (USVP), and Cato Networks co-founder and CEO Shlomo Kramer. The investment round followed on the heels of a 220% increase in bookings last year, a strong first quarter and a large recent spike in business related to the coronavirus pandemic.
"The size of the funding round and the caliber of the investors continues to validate the quality of the team and the product foundations they've laid," said Roy Chua, founder and principal of AvidThink.
Cato Networks announced a $55 million round of funding in January of last year.
"So our objective is to basically scale up the business, to grow sales, marketing, and engineering," said Cato Networks Chief Marketing Officer Yishay Yovel of the latest funding round. "It gives us a pretty significant runway. We didn't raise money because we ran out of money. We did this because it's a long game.
"The company is engaged in the SASE play, which is a very big transformation It’s a multi-year transformation that involves large players with multiple solutions that we are competing against."
Gartner coined the SASE (Secure Access Service Edge) term last year. SASE converges the functions of network and security point solutions into a unified, global cloud-native service, according to Gartner. While Cato has laid claim to being one of the leading companies in the SASE space, Yovel said Cato was SASE before the term was coined.
"The key attributes of SASE is it's a cloud platform that is globally distributed, that is supporting all of the edges—meaning users, branches and clouds— in the same way," he said. "It's basically a cloud first architecture where everything is first in the cloud, and then next in the edges. This is how Cato was built from day one."
Yovel said that Cato built its SD-WAN offering as a cloud platform and not as a point service or feature that other SD-WAN vendors are deploying. Companies with multiple SD-WAN solutions such as Cisco, which has Viptela, Meraki and IWAN offerings, have products on premise and in the cloud, and technologies with multiple management interfaces. Because service providers use SD-WAN vendors with point solutions instead of a cloud-based platform, they need to deploy multiple SD-WAN solutions from several SD-WAN companies, according to Yovel.
"The move towards SASE, along with the current world conditions, spotlight the importance of secure, reliable, remote connectivity, and are an ideal proving ground for Cato to show that it can scale," Chua said. "With a cloud-first and cloud-native approach, as well as their security DNA, they've demonstrated clear viability and uptake in the market."
Yovel said Cato has over 500 customers, 4,500 branches under management, and about 100,000 mobile users that it's supporting. Because of its cloud-based architecture and self-healing points of presence (POPs) at the edge, Cato has been able to provision customers on the fly during the coronavirus pandemic.
"In our concurrent users, our cloud platform went from 15,000 in mid-February to 40,000," Yovel said. "We basically absorbed 25,000 more users. They are people that used to work in the office and now work from. Instead of being in the office behind our SD-WAN solution, the device or the socket, they're now at home with the client logging in into the same SASE service.
"All of our capabilities are available to an individual user at home the same way they were available to a user at the branch (office). The customer doesn't have to worry about scalability, sizing, upgrades, or the VPN servers just because you suddenly have 1,000 mobile users instead of 100 mobile users."
IPO in the offing for Cato Networks?
Last week, Palo Alto Networks bought SD-WAN vendor CloudGenix for $420 million. Yovel said that while companies don't typically comment on acquisition rumors, Cato Networks wasn't going to be bought as a feature on a potential buyer's platform, which is how he characterized the CloudGenix deal.
"We are building a platform company, which means that we are a very broad solution with a very specific kind of delivery, which is a cloud service," he said. "So if you are a company that offers a point solution or a feature, it's easier to get bought. We are we are raising money to build a very big company. And, again, it's not going to be an SD-WAN point solution company. That's not the play."
As for an IPO, Yovel said there was no timeline on the horizon because Cato Networks was still in build-up mode, but "an IPO when it makes sense could happen for any company that is growing very rapidly."
With more than 50 SD-WAN players in the market, more consolidation could take place this year, but Cato is keeping its eyes on the prize.
"It's an execution game now to drive to a business outcome that makes sense for them, whether acquisition—and the price just went up with this funding round—or perhaps an eventual IPO," Chua said.