Thanks to advances in artificial intelligence, small and medium-sized businesses have become a major target in the world of cybercrime, accounting for around half of all breaches worldwide according to some estimates. Now, one of the companies that makes security tools for small and medium businesses has raised a round of funding to expand its operations, underscoring the market demand for better defenses.
Guardzan Israeli startup that has built an all-in-one cyber security and insurance service for small and medium-sized businesses has raised another $18 million in a Series A funding round.
The company came out of stealth less than a year ago (at the end of January 2023) and has been on a bit of a roll since then. It no longer sells directly to SMBs, but works with managed service providers who in turn sell and manage IT services for SMBs. MSPs, they found, were the main route for their product to be used by SMBs (meaning direct businesses weren’t taking off). Now these MSPs are able to build their own offers “powered” by Guardz.
“This is the journey. It’s a hybrid solution, powered by Guardz but with the MSP logo on the front,” Dor Eisner, the CEO, said in an interview.
The plan will be to use the funding to hire more engineering talent to continue developing the Guardz product, which is sold primarily to customers in the US, UK and Australia. It currently has approximately 200 MSPs on its books, who in turn work with approximately 3,000 SMBs, which in turn represent approximately 36,000 positions in total using Guardz products. Security remains the main revenue driver, with cyber insurance as an optional add-on.
Glilot+, Glilot Capital Partners’ early-stage fund, is leading the round, with ClearSky and previous backers Hanaco Ventures, iAngels and GKFF Ventures also participating.
The company doesn’t disclose its valuation, but Eisner — who co-founded the company with Alon Lavi — said the figure has tripled since its last fundraising round, a $10 million round that coincided with Guardz’s exit stealth.
To give a little more context: The startup has now raised $28 million and while securing around 36,000 “seats” is growing rapidly, in an interesting opportunity for more customers as there are around 150,000 MSPs worldwide serving the SMB market, he said Eisner. That likely puts Guardz’s valuation comfortably above $100 million.
The gap in the market that Guardz is targeting is large and urgent. In the past, SMBs were overlooked by cybercriminals largely for the same reasons they were largely overlooked by more advanced B2B technology developers: SMBs are highly fragmented as a group and typically do not represent a lucrative ROI in comparison with large businesses.
However, advances in artificial intelligence have made it very easy for malicious actors to develop, execute and scale campaigns that exploit vulnerabilities. This was a worrying development because typically SMEs lacked the in-house expertise and tools to defend against this.
Guardz’s goal was to create a security platform for these customers that was as strong as what larger organizations could use. The platform is delivered as a managed service — meaning the customer does little to manage it directly — but within that managed service, there’s a lot of AI-based automation: Guardz tools automatically detect malicious activity, provide remediation against and write up activity reports that can be further tested by the MSP. The MSP can also use Guardz to create security breach simulations — tailored to that SMB’s specific business — that can be used to help train their customer employees.
Part of the funding will be used to continue expanding the tools available to its team to respond to the increasing sophistication of bad actors.
“Every day we find a new method that hackers use,” Eisner said. A recent discovery, he said, involved a method of creating automated forwarding rules for those using Microsoft 365, giving malicious actors a way to harvest emails “in a silent manner.”
“We found that people were talking about this attack on the dark web, so we decided to develop detection and remediation around it,” he said, adding that a technique like this would likely be used as part of a multi-vector attack, alongside phishing. for example.
SMBs have become a sharper target for technology companies creating business services not only because innovations in cloud services and artificial intelligence have improved the unit’s finances. It is also because they are a huge part of the market, accounting for over 99% of all businesses worldwide. And that can mean big businesses in a variety of industries. Payments and fintech business SumUp, which also targets SMBs, announced earlier this week more than $300 million in funding to expand its platform and grow its customer base. Guardz isn’t alone in building cybersecurity for SMBs, either. Others on the long list of direct competitors include CyberSmart out of the UK as well as bigger players like CrowdStrike and Check Point.
“When we met the exceptional team at Guardz, which combines leading cybersecurity leaders with experts in the small business market, it became clear that they had created the ultimate solution for small business cybersecurity – a long-standing and rapidly growing market need that we had tracking at Glilot for a while,” Lior Litwak, who is the managing partner leading Glilot+, said in a statement. “Guardz has developed an impressive, holistic and user-friendly cybersecurity and cyber security risk assessment platform that is intelligently tailored to MSPs, who serve the often-overlooked small business market. We are excited to lead this round of funding and join the Guardz team on their journey to secure the digital world for those who need it most today.”
