Endpoint Security , Governance & Risk Management , Internet of Things Security

Schneider Electric and Mitsubishi Give Nozomi Networks $100M

An OT and IoT vendor led by an ex-Imperva and EMC executive closed a Series E round to help critical infrastructure operators' better safeguard assets.

See Also: SASE: Recognizing the Challenges of Securing a Hybrid Workforce

The $100 million will help San Francisco-based Nozomi Networks extend from asset inventory into asset management and build out analytical tool sets in areas such as preventative maintenance, said President and CEO Edgard Capdevielle. The investments will build on moves Nozomi has made in the past year to better secure networks, endpoints and wireless technology in industrial and manufacturing settings.

"Having Mitsubishi and Schneider Electric onboard sends a strong signal to the market about the importance of cybersecurity for critical infrastructure," Capdevielle told Information Security Media Group. "For the longest time, availability was the only thing. After Colonial Pipeline, folks are realizing that industrial control and IoT networks that support critical infrastructure need to be protected."

The Series E funding comes two and a half years after Nozomi closed its $100 million Series D round, which was led by Triangle Peak Partners. Capdevielle said Nozomi's valuation is significantly higher today than in August 2021, though he declined to provide exact figures. Receiving financial backing from OEM partners and resellers such as Honeywell and Johnson Controls indicates Nozomi's growth potential, he said.

"An IPO would only be a milestone. Our goal is category domination."
– Edgard Capdevielle, president and CEO, Nozomi Networks

Asset management is a natural extension of asset inventory, which Capdevielle said is significantly more difficult in industrial control networks than in traditional IT networks. Unlike IT equipment, OT and IoT devices are created for a single purpose and therefore consist only of minimal hardware and firmware for cost optimization purposes. This makes it tougher to spot OT and IoT tools in a company (see: Nozomi CEO on Building Bonds With Industrial Control Vendors).

"The OT and IoT cybersecurity landscape is ripe with opportunities for us to lead with first-to-market solutions," said Capdevielle, who previously served as an Imperva and EMC executive before taking over at Nozomi in 2016. "Customers rely on us being able to have industry firsts."

Second OT Security Funding Round in Two Weeks

Unlike typical startups, Capdevielle said, Nozomi's focus on the electricity, oil and gas, and manufacturing verticals required a global approach from the outset since most of the production and distribution in those spaces takes place outside the United States. Nozomi's top challenge remains converting the large potential market into actual sales given the lack of budget inertia for more security spending, he said.

Nozomi's Series E haul comes just a week after industrial cybersecurity competitor Claroty raised $100 million to expand its presence in the transportation and public sectors and pursue acquisitions in areas such as microsegmentation. Claroty and Nozomi are typically considered leaders in the pure-play OT cybersecurity market alongside Dragos, which in September closed a $74 million Series D extension (see: Claroty Gets $100M for Global Growth, Microsegmentation M&A ).

"When we started in this business, I could credibly name 15 to 20 competitors," Capdevielle said. "Nozomi Networks not only has survived all the different waves of pruning, but I think the top three are now very distinct and well-established. This is a very large category that is going to support more than one player."

Capdevielle said Nozomi is making preparations for an initial public offering and should be ready to go public in 18 to 24 months, if market conditions permit. Until then, he said, Nozomi is focused on efficient growth and will monitor annual recurring revenue and sales and marketing spend to ensure the company remains cash flow profitable.

"For us, an IPO would be only a milestone," Capdevielle said. "Our goal is category domination. That's what we want to do."