Private Equity’s Cybersecurity Funding Frenzy Continues: Term Sheet

As with its initial round of funding in KnowBe4, KKR is making its investment through its $711 million Next Generation Technology Growth Fund, which targets the software, security, digital media and information technology sectors.

KKR raised the fund in 2016, and it has delivered returns through the likes of endpoint security software firm Cylance, which was acquired by BlackBerry for $1.4 billion earlier this year, and is a lead investor in British artificial intelligence firm Darktrace, which closed its most recent funding round in September at a $1.65 billion valuation.

“What we’re seeing in the cybersecurity industry is that there’s a demand for these kinds of products,” KKR director Stephen Shanley tells Fortune. That demand has translated to triple-digit revenue growth for KnowBe4, which has a customer base of more than 25,000 organizations and recurring revenues exceeding $100 million annually.

I've written extensively about private equity's appetite for cybersecurity companies over the last several years. And it's easy to see why PE finds the sector so attractive — global spending on technology to protect sensitive data and information is expected to reach an unprecedented $124 billion this year.

My colleague Rey Mashayekhi has the full scoop on KnowBe4 here.

THE STATE OF THE WEB: Dubbed “Queen of the Internet,” Bond Capital’s Mary Meeker unveiled her annual Internet Trends Report yesterday. The 333-slide presentation presents a detailed snapshot of the current state of the online industry. Here are some key insights:

— Some 51% of the world — 3.8 billion people — were Internet users last year, up from 49 percent (3.6 billion) in 2017.

— As of last week, seven out of 10 of the world’s most valuable companies by market cap are tech companies, with only Berkshire Hathaway, Visa, and Johnson & Johnson making the Top 10 as non-tech companies.

— Internet ad spending accelerated in the U.S., up 22% in 2018. Most of the spending is still on Google and Facebook, but companies like Amazon and Twitter are getting a growing share.

— Americans are spending more time with digital media than ever: 6.3 hours a day in 2018, up 7% from the year before. Most of that growth is coming from mobile and other connected devices, while time spent on computers declines.

— As privacy becomes a bigger selling point, expect more options to make your online communications safe. In Q1, 87 percent of global web traffic was encrypted, up from 53 percent three years ago.

— Of the top 25 most valuable private tech companies, 60% were founded by first- or second-generation immigrants. They employed 1.9 million people last year. (Even my home country Bulgaria appears on the list thanks to Vlad Tenev, the co-founder of Robinhood, which is valued at ~$6 billion, according to her report.)

Read more at Fortune.

SOFTBANK MONEY: Gympass, a Brazil-based corporate fitness platform, raised $300 million in funding at a valuation of more than $1 billion. Investors include SoftBank Vision Fund, SoftBank Latin America Fund, General Atlantic, Atomico, and Valor Capital Group. This is the second large check SoftBank has written in Brazil recently. It invested in logistics startup Loggi earlier this month.

FEMTECH FUNDING: Femtech is experiencing an influx of investment and innovation, in large part because it's been ignored for so long. Modern Fertility, a women’s health startup that’s making fertility hormone testing more accessible, raised $15 million in Series A funding from investors including Kirsten Green’s Forerunner Ventures.

My colleague Beth Kowitt reports:

Modern Fertility, which was started in 2017 by Afton Vechery and co-founder Carly Leahy, provides an at-home hormone lab test that would normally be conducted at a fertility clinic when a woman is struggling to get pregnant. It makes those tests available to women earlier in life at a lower cost. “We in society today are so focused on preventing pregnancy instead of planning for it—it’s this almost immediate transition and it’s a total black box,” says Vechery. “We’re really transitioning the conversation to how can we think about fertility in a preventative care context proactively.”

Read the full story here.

PEOPLE MOVES: Term Sheet has learned that Andreessen Horowitz’s late-stage venture unit is no longer a one-man operation. Until now, David George was the sole partner to focus on the firm’s new $2 billion late-stage venture fund.

George, who is a general partner, will be joined by two new deal partners. (Deal partners work closely with the GP to do diligence and vet potential investments.) The two new team members are: Sarah Wang, who was previously a vice president at TA Associates for three years; and Alex Immerman, who worked at Facebook, Gainsight, and General Atlantic.

THE LATEST FROM FORTUNE...

• Does Capitalism Have a PR Problem? (by Erika Fry)

• Facebook Debuts a New Tracking App Just Months After Controversy Over a Similar App (by Danielle Abril)

• How to Avoid Winding Up As Pets for A.I. Robots (by Robert Hackett)

• Citigroup CEO: We Have to Change Our Culture to Keep Talented Women and Minorities (by Rey Mashayekhi)

VENTURE DEALS

• Adjust, a Germany-based mobile application tracking and analytics company, raised $227 million in funding. Investors include Eurazeo Growth, Highland Europe, Morgan Stanley Alternative Investment Partners and Sofina.

• BetterUp, a San Francisco-based provider of a leadership development for companies, raised $103 million in Series C funding. Lightspeed Venture Partners led the round, and was joined by investors including Threshold Ventures (formerly DFJ Venture), Freestyle Capital, Crosslink Capital, Tenaya Capital and Silicon Valley Bank.

• Minute Media, a London-based sports media and technology company, raised $40 million in funding. Investors include Hamilton Lane, Maor Investments, Battery Ventures, Goldman Sachs, ProSieben, Dawn Capital, Qumra Capital, Vintage Investment Partners and Gemini Israel Ventures.

• Skupos, a San Francisco-based data platform for convenience retail, raised $26 million in Series B funding. Insight Partners led the round, and was joined by investors including Unilever Ventures, Tao Capital and prior backers Toba Capital, Dynamo Ventures, and Loup Ventures.

• Sunbit, a Los Angeles-based financial technology company, raised $26 million in Series B funding. Zeev Ventures led the round, and was joined by investors including Group 11 and Chicago Ventures.

• Neurotrack, a Redwood City, Calif.-based digital health company, raised $21 million in Series C funding. Khosla Ventures led the round.

• Pryon Inc, a Raleigh, N.C-based AI technology company, raised $20 million in Series A funding. The investors were Revolution’s Rise of the Rest Seed Fund, Breyer Capital, Greycroft and Digital Alpha Advisors.

• Misfits Market, a Philadelphia-based fresh produce delivery service, raised $16.5 million in Series A funding. Greenoaks Capital led the round.

• Fireblocks, a New York-based enterprise platform for securing digital assets in transit, raised $16 million in Series A funding. Investors include Cyberstarts, Tenaya Capital, Eight Roads, Swisscom Ventures and MState.

• CredSimple, a New York-based cloud-based healthcare credential verification organization, raised $14 million in Series B funding. Questa Capital led the round, and was joined by investors including Windham Venture Partners and Primary Ventures.

• ADDI, a Colombia-based provider of credit and banking solutions, raised $12.6 million Series A. Andreessen Horowitz led the round, and was joined by investors including Monashees, Village Global, and Sinai VC.

• Alyce Inc, a Boston-based developer of an online corporate gifting platform, raised $11.5 million in Series A funding. Manifest led the round, and was joined by investors including General Catalyst, Boston Seed Capital, Golden Ventures, Morningside and Victress Capital.

• Testim, a San Francisco-based provider of AI based software testing, raised $10 million in Series B funding. SignalFire led the round, and was joined by investors including Meron Capital, Lightspeed Venture Partners, NHN Ventures and Spider Capital.

• Apricity, a U.K.-based virtual fertility clinic, raised €6 million ($6.8 million) in Series A funding from Kamet Ventures.

• Nym, an Israel-based autonomous medical coding technology provider, raised $6 million in seed funding. Bessemer Venture Partners led the round.

• Tenderd, a Dubai-based heavy equipment rental marketplace, raised $5.8 million in seed funding. Investors include Y Combinator and BECO.

• Funderbeam, an Estonia-based funding and trading platform, raised $4.5 million in Series A funding. Accelerated Digital Ventures led the round, and was joined by investors including GK-Plug and Play Indonesia, Pandan Ventures, Draper Associates, Draper Venture Partners, IQ Capital, and Mistletoe.

HEALTH AND LIFE SCIENCES DEALS

• Oncologie, a Boston and Shanghai-based biopharmaceutical company, raised $80 million in Series B funding. Nan Fung Life Sciences and Pivotal BioVentures China co-led the round.

• Genome Medical, a South San Francisco-based telegenomics company, raised $23 million in Series B funding. Echo Health Ventures led the round.

PRIVATE EQUITY DEALS

• Industrial Opportunity Partners acquired United Poly Systems LLC, a Springfield, Mo.-based maker of high density polyethylene pipe. Financial terms weren't disclosed.

IPOs

• CrowdStrike Holdings, a Sunnyvale, Calif.-based cloud security software maker, raised $612 million in an IPO of 18 million shares priced at $34. It posted sales of $250 million the 12 months ended January 31, 2019 and loss of $140 million. Warburg Pincus (30.3%), Accel (20.3%) and Alphabet (11.2%) back the firm. Goldman Sachs, J.P. Morgan, BofA Merrill Lynch and Barclays are lead bookrunners. It plans to list on the Nasdaq under the symbol “CRWD.” Read more.

• Sunnova Energy, a residential solar system company in the U.S., plans to IPO in a deal that could value it at over $1 billion, Reuters reports citing sources. Read more.

EXITS

• Distribution International, a portfolio company of Advent International, acquired Silvercote, a Greer, S.C.-based manufacturer of fiberglass insulation, from Knauf Insulation. Financial terms weren't disclosed.

• CloudBees acquired Rollout, a secure feature management company providing software specifically targeted for developers and product teams. Financial terms weren't disclosed. Rollout had raised approximately $3 million in venture funding from investors including Sweet Capital, 2B Angels, Star Farm Ventures, PLUS Ventures, and Canaan Partners Israel.

• ZOLL Medical Corporation agreed to acquire Cardiac Science Corporation, a Waukesha, Wisc.-basedprovider of automated external defibrillators, related services and accessories. The seller was Aurora Resurgence. Financial terms weren't disclosed.

• Versa Capital Management agreed to sell Polartec, LLC, a provider of performance textiles for outdoor and military apparel to Milliken & Company. Financial terms weren't disclosed.

FIRMS + FUNDS

• Crane Venture Partners, a U.K.-based venture capital firm focused on early-stage intelligent enterprise startups, raised $90 million for its debut fund, Crane I.

PEOPLE

• Jason Burmer joined Edgewater Capital as vice president.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.