Aileen Lee coined the term Unicorn ten years ago. 

Unicorn: a  VC-backed startup that has grown to be worth $1B+ within ten years.

Aileen, now the Founder & Managing Partner of Cowboy Ventures, recently wrote the worth reading article Welcome Back To The Unicorn Club, 10 Years Later.

I have three thoughts on the pure play OT security unicorns, but first let’s identify them.

  1. Dragos ($1.5B – $2.5B valuation)
  2. Claroty (not a stretch since they have raised $635M, a lot of it to acquire Medigate)

The only other possible OT security unicorn is Nozomi Networks. My guess, and it can’t even be called analysis, is $750M + or – $300M.

There are others you might think are unicorns such as Tenable (over 10 years old and not OT security pure play), Armis (not OT security pure play), or OPSWAT (22 years old and less compelling story).

Here are the three thoughts:

Are They ZIRPcorns?

In her latest article Aileen Lee added the term ZIRPcorn (Zero Interest Rate Policy unicorns). Companies that raised their last money and received their last valuation in the zero interest rate period between 2020 – 2022. The danger is ZIRPcorns could run out of money and require to raise another round in an environment where cash is no longer trash.  ZIRPcorns could lose their unicorn status or be forced to a less than desired exit.

Dragos isn’t a ZIRPcorn. While ZIRP likely helped in their Series D, they raised $74B in Sept 2023 at the same $1.7B valuation. 

Claroty raised $400M in 2021 to buy Medigate. They still are likely a Unicorn if only for the reason that 2x the money raised is $1.27B. Also the twin stories of OT security and medical device / system security are a buzz worthy one-two punch.

Cybersecurity Public Company Numbers

The market believes, as it has the last 10 years, in the cybersecurity market. The financial numbers mostly reflect the view that cybersecurity product and service sales are still in their infancy. Crowdstrike’s stock price increased 200% in 2023 and reached a $68B market cap … and still is not profitable. Palo Alto stock price increased by 150% in 2023 and their market cap eclipsed $100B. They are profitable with a PE of ~200. Tenable, founded in 2002 and who is active in OT security, has a much smaller market cap of $5B. Tenable is not profitable.

The companies show a better story with Non-GAAP numbers, but even with those numbers the stock prices don’t make sense unless you believe in the market size hockey stick graph. The market believes, and there is little reason to think this will change in the next three years.

This is good news for OT security startups needing to raise money and some of the unicorns and near unicorns who might choose to go public in 2024/2025. 

VC Hires OT Security Leader

Last week Energy Impact Partners, the VC who funded Dragos, FiniteState, Network Perception, and SCYTHE, hired Jason Christopher. Jason is an OT security risk specialist with past roles at EPRI, Axio and most recently Dragos.

With the exception of asset owner venture arms, such as Shell Ventures, this is the first instance I’ve heard of where a VC hires OT security talent and expertise. Typically they contract this talent as part of the due diligence before making an investment. If this is not a one off, it’s a good sign for OT security startups.