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SD-WAN

Cato Captures $130M in VC funding

SASE provider Cato Networks has raised a cool $130 million in its largest funding round to date. Investor partners for round E of funding include new investors Lightspeed Venture Partners and Coatue and existing investors Greylock, Aspect Ventures/Acrew Capital, Singtel Innov8 and Cato CEO Shlomo Kramer.

This brings total funding to $332 million for the Israel-based secure access service edge (SASE) provider. In addition, Cato claims the company is valued at $1 billion.

CEO and Co-founder Shlomo Kramer says the managed service provider is now valued at $1 billion because of its all-in approach to SASE, investor interest in the business, growing customer base and employee expertise in SASE. "We are very well positioned to carve out a big piece of this opportunity and hence this evaluation," said Kramer in a press conference call.

This most recent round of funding comes only seven months after Cato pulled in $77 million this April, with contributions from Lightspeed Venture Partners, Aspect Ventures, Greylock Partners, Singtel Innov8, U.S. Venture Partners (USVP) and Cato's Kramer. During the April funding round, Zeus Kerravala, founder and principal analyst for ZK Research, told Light Reading that SD-WAN has opened the door for companies like Cato and Aryaka to compete with traditional telcos, which are held back by a "lack of agility." Cato provides "a solid SD-WAN service that's aligned in the direction of where SASE is going and the funding is certainly supportive of that," he said.

In addition to Aryaka, SD-WAN vendors and telcos providing SD-WAN/SASE managed services, Cato says security suppliers such as Palo Alto that have been growing their SASE services are among the company's competitors.

During the press conference, one listener inquired if Cato's evaluation and funding announcement positions the company for an IPO. But Kramer wasn't biting, responding, "I'll give the answer I always give, which is we are really focused on being a standalone leader in this specific category [of SASE], and that's what we are here to do."

Cato later released a similar statement following up on the IPO question: "We are building a large standalone company that will be the leader of the SASE market."

However, anything is possible as it's been a big year for massive acquisitions in the SD-WAN space with HPE's $925 million acquisition of Silver Peak and Palo Alto's $420 million acquisition of CloudGenix.

SASE's combination of networking, SD-WAN and security services has also become increasingly appealing to enterprises with remote workers. Cato's SASE remote access usage has soared – from 15,000 to 50,000 users – since the start of the COVID-19 pandemic in mid-March, said CMO Yishay Yovel.

"When COVID hit, it skyrocketed," said Yovel. "Essentially all of our customers, instead of buying selectively remote access licenses for the individuals that needed them, had to give remote access to everyone instantly. You need a cloud-scale, cloud service and global capability to absorb this increase so fast. Not only absorb it, but protect the users at home as if they were in the office."

Cato has 650 enterprise customers in 100 countries, 7,000 branches and cloud instances, 200,000 mobile users and over 60 PoPs globally. Cato says it will close out the year with 270 employees globally, and expects to expand to 385 employees by the end of 2021.

— Kelsey Kusterer Ziser, Senior Editor, Light Reading

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