His company just raised $238m, so what's eating Shlomo Kramer?

• Published date: 28 September 2023
• Author: Assaf Gilead
• Publication title: Globes (Rishon LeZion, Israel)

Last Tuesday should have been a day of celebration at Cato Networks, the third company founded by Kramer, and the second which he has managed personally. Despite the global high-tech crisis, as well as the cyber bubble bust, and despite Kramer's doom-laden prophecies about the damage caused by the judicial reform, Cato Networks raised $238 million from its existing investors, among them Lightspeed Venture Partners, as well as from some surprising new investors, including former Mossad chief Yossi Cohen, who led a $30 million investment by SoftBank, where Cohen has been employed for the past two years

This is Cato Networks' eighth fundraising round. Not an earth-shattering move, but in a difficult environment even an increase from the $2.5 billion valuation at which it was issued two years ago, at the height of the bubble, to $3 billion today is a fine achievement. Considering that its annual revenue rate last year was $100 million, this is a high, 30x multiplier, a rare valuation that only experienced entrepreneurs, who have proven themselves in huge IPOs, could ask.

Kramer is just that, as an experienced entrepreneur who knows what he's doing. Cato was founded nine years ago, and is considered a leading candidate for an IPO. Despite the high-tech crisis, Cato did not lay off employees, and even grew, so chances were good that it would raise funds at an increased valuation. And despite it all, Kramer says, it was not easy. "This was the hardest funding round I've ever done in my life."

The Nasdaq IPO market seems to have opened up, with three offerings in the past week. What are your plans?

"We've been preparing for some time for the possibility of going public in the fourth quarter of 2024, and if the market is open enough to allow a successful public offering, we will go for it too. We have an orderly timetable, and we're working methodically to get there."

Cato Networks was founded in the middle of the previous decade, and has since raised close to $800 million. It was founded by Kramer and his Imperva colleague Gur Shatz as a "Next-Generation Firewall (NGFW)" cyber company using innovative cloud technologies to protect the enterprise communication network from the outside world.

Cato Networks gained unicorn status in 2020, when it raised $130 million, but it took a bit longer to gain recognition. Only during the past year has it been able to convince research firm Gartner Group to create a special industry category called Secure Access Service Edge, or SASE, which put Cato in a prominent spot alongside Palo Alto Networks, Fortinet, Cisco, and VMware. The category represents a new way of protecting access to devices in the enterprise -- phone, computer, car, even refrigerators -- that are connected to the cloud through a service provided to IT systems administrators.

Since August, we've seen six large merger and acquisition deals worth hundreds of millions of dollars each for Israeli cyber companies, three of them in the last two weeks, including Ermetic, Bionic, and negotiations to sell Talon Cyber Security for $650 million. What's going on here? Does this characterize high-tech in general, or does it apply to cyber only?

"As far as I can figure, it's mostly focused on cyber. I haven't seen much activity outside this industry. The reason is that we've opened a new chapter in this book called cyber, and it's characterized by the fact that companies in this sector are aiming to build platforms: systems that offer an entire suite of services and not just one single service. That's what customers are looking for; they can't deal any longer with the complexity of working with individual products. The pace of business demands that they move quickly, so cyber is now in a major transition, and SASE is at the center of all this activity. "...