Skyhigh Raises $40 Million as Companies Secure the Cloud

Skyhigh Networks Inc., a security-technology startup that provides tools to help companies monitor cloud-computing usage, raised $40 million as it rides demand for Internet-based software and security.

The financing was led by previous investors Greylock Partners and Sequoia Capital, with participation from Salesforce.com Inc. (CRM), and brings Skyhigh’s total funding to $66.5 million. The Cupertino, California-based company, which was founded two years ago, said its valuation is less than $1 billion.

Cloud-security companies are chasing a big opportunity as organizations access programs via the Web and also try to ensure that the software is secure. The cloud-based security services market is projected to reach $3.1 billion next year, up from $2.1 billion in 2013, according to Gartner Inc. The shares of security companies Palo Alto Networks Inc. (PANW) and FireEye Inc. (FEYE), which have cloud-based products, are up more than 80 percent since their initial public offerings in 2012 and last year respectively.

Security-technology companies in general are seeing a surge in funding. Investors put $1.7 billion into cyber-security startups in 2013, up 40 percent from the previous year, according to CB Insights.

“The genie is out of the bottle,” said Skyhigh Chief Executive Officer Rajiv Gupta. “Employees are using cloud services in droves before the company has had a chance to approve or assess these cloud services.”

Finding Flaws

Skyhigh provides tools that let companies monitor and analyze the cloud services that their employees are using. The software detects abnormalities that might point to a breach or defect, as well as encrypting data stored in and transferred using Web-based services.

Customers pay a recurring fee for the software package. Skyhigh also assesses and provides a risk rating for cloud service providers free of charge. Its customers include Cisco Systems Inc. and Clorox Co., according to the company’s website. Revenue has increased sixfold since last June, Gupta said.

Skyhigh, which has 133 employees, plans to hire aggressively and use the new funding to expand internationally, he said. The company plans to go public at some point, he said.

“The goal is to build a long-term independent company” and “literally have every large organization in the world” as customers, said Asheem Chandna, a venture capitalist at Greylock and a board member of Skyhigh. “There is a broad base need building here across the largest companies in the world, and we’re early in the adoption cycle.”

To contact the reporter on this story: Jing Cao in New York at hcao38@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Reed Stevenson

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