Scrutiny of Security Start-Ups May Signal Shift in Venture Funding

Cybersecurity companies have had an easy time raising money in Silicon Valley over the last few years. But investors are starting to ask about profit and sustainability.

SAN FRANCISCO — A funny thing happened to Orion Hindawi while he was raising $120 million for his cybersecurity start-up last month: Investors asked him about profits.

A year ago, Mr. Hindawi raised $90 million, followed by an additional $52 million this year from the Silicon Valley venture firm Andreessen Horowitz. Investors were willing to place a $900 million valuation on his company, called Tanium, without so much as a glance at revenue or profit margin.

This time, not so. As he made the rounds with investors like Institutional Venture Partners and T. Rowe Price, Mr. Hindawi said, he was asked to show sales and profit margins. “A lot of the funders we spoke with are starting to get really scared,” he said. “This time the questions were, ‘Is this a sustainable business? Do you guys actually make money?’ ”

Sourced through Scoop.it from: www.nytimes.com

Cybersecurity companies have had an easy time raising money in Silicon Valley over the last few years. But investors are starting to ask about profit and sustainability.    A funny thing happened to Orion Hindawi while he was raising $120 million for his cybersecurity start-up last month: Investors asked him about profits.  A year ago, Mr. Hindawi raised $90 million, followed by an additional $52 million this year from the Silicon Valley venture firm Andreessen Horowitz. Investors were willing to place a $900 million valuation on his company, called Tanium, without so much as a glance at revenue or profit margin.   This time, not so. As he made the rounds with investors like Institutional Venture Partners and T. Rowe Price, Mr. Hindawi said, he was asked to show sales and profit margins. “A lot of the funders we spoke with are starting to get really scared,” he said. “This time the questions were, ‘Is this a sustainable business? Do you guys actually make money?’ ”

See on Scoop.itCrowd Funding, Micro-funding, New Approach for Investors – Alternatives to Wall Street

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