Israeli Cybersecurity Startup Acquired by Global Firm for $560 Million

Demisto, U.S.-based Palo Alto Network's fourth Israeli purchase, works to automate threat management in major organizations' situation rooms. It has raised $69 million to date

File photo: Demisto founders Slavik Markovich, Dan Sarel, Guy Rinat and Rishi Bhargava, May 2016.

Global cybersecurity company Palo Alto Networks, founded by Israeli Nir Zuk, announced on Tuesday it entered into a definitive agreement to acquire Israeli startup Demistro for $560 million in cash and stocks. The acquisition is due to be completed in the third quarter of U.S.-based Palo Alto's fiscal year, which end in April.

Demisto, which has raised $69 million to date, is one of many companies founded in recent years with the aim of addressing a lack of cybersecurity analysts, who can react on warnings generated by classic cybersecurity software such as Palo Alto, Check Point and Symantec, in situation rooms of major organizations. Information security teams struggle to allocate enough time to in-depth investigation of all warnings, and are sometimes too slow to respond.

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The Israeli startup has more than 150 customers, a quarter of which are Fortune 500 companies, and including major organizations in health care, technology and finance, Palo Alto noted.

Employing machine-learning technology, it operates in a field known as security orchestration, automation and response (SOAR), working to automate threat management analysis in order to reduce the number of alerts that require human intervention by as much as 95 percent, enabling security teams to focus on the most complex threats, Palo Alto explained.

Other companies in this field include Hexadite, which was bought by Microsoft in June 2017, and Secdo, which was bought by Palo Alto in April for $100 million. Demisto’s product is synergetic with Secdo.

An industry source said that the Demisto acquisition, should it go through, is an effort by Palo Alto to enhance its Israeli manpower. “Palo Alto’s development center has suffered from a high turnover rate for managers and developers, and it’s struggling to hire manpower in a competitive field, where the list of open positions is very long,” he said.

Demisto, founded in 2015 by Slavik Markovich, Dan Sarel, Guy Rinat and Rishi Bhargava, has 180 employees, half of them in Tel Aviv, and the remainder in California, London, Germany and Australia. Industry sources estimate that the company has annual revenues of $20 million, and its investors include U.S. venture capital funds Greylock, ClearSky and Accel.

Markovich, the company’s CEO, was also a founder of the startup Sentrigo, which developed a database security product that was sold to McAfee in 2011 for tens of millions of dollars.

Palo Alto ventures was founded in 2006, and trades on Nasdaq at a market cap of $21 billion. Demisto would be its fourth acquisition in Israel.