KKR, Softbank Fund Mike Lynch’s Darktrace Cybersecurity Startup

(Bloomberg) -- Darktrace, a three-year-old cybersecurity company based in Cambridge, England, that uses artificial intelligence to detect threats, has received a $65 million investment round lead by KKR & Co LP with participation from Japan's Softbank Group.

The new funding, which also included San Francisco-based venture capital firm TenEleven and existing investor Summit Partners, a London-based growth fund, values Darktrace at more than $400 million.

Mike Lynch, the former chief executive officer and co-founder of Autonomy Plc., whose technology investment firm, Invoke Capital, helped create Darktrace in 2013, said the company's revenues have been expanding at 600 percent annually and that the current funding round was key to ensuring the company can maintain that growth. 

Lynch said he was eager to get both San Francisco-based KKR and Softbank as investors, especially given that Darktrace is targeting expansion in both the U.S. and Asia. Invoke remains Darktrace's largest shareholder, he said.

GCHQ, Cambridge

Darktrace was founded by a team that included former top officials from the U.K.'s Government Communications Headquarters (GCHQ), and computer scientists from the University of Cambridge. It uses a piece of hardware that plugs into a customer's network and quickly learns its normal "pattern of life" and how different devices connected to the network normally function. This enables the system to detect anomalies as they occur.

The approach differs from the methods of other cybersecurity systems that focus on protecting the borders of a network -- through so-called "firewalls" -- and identify attacks that match known threat signatures. "If you take FTSE 100 type companies, 80 percent of them have something significantly nasty going on behind the firewall," Lynch said.

He said Darktrace, which currently employs 300 people, would focus on expanding its sales force globally and also on continued development of its technology, using machine learning to not just detect threats lurking behind a company's firewalls but also to automatically mitigate those threats, much in the way the human immune system can both find and neutralize viruses. 

Stephen Shanley, a principal on KKR's Technology Growth Equity team, wrote in a statement that KKR had been impressed with Darktrace's technology, which he said was unique in the industry. Shanley said Darktrace's product "can detect threats that other cyber solutions fail to identify."

Although Darktrace is based in the U.K., Lynch said he saw little impact on the company's business from Brexit. "In the cyber area there is a real urgency to the problem and there is very little that actually works," he said. As a result, customers don't worry very much about where the technology comes from, just whether it works, he said.

To contact the reporter on this story: Jeremy Kahn in London at jkahn21@bloomberg.net. To contact the editors responsible for this story: Nate Lanxon at nlanxon@bloomberg.net, Molly Schuetz