Extra Crunch Roundup: Security, China, and Exits

ExtraHop Acquisition by Bain Capital and Crosspoint Capital Partners

Breaking news emerged today regarding the acquisition of ExtraHop, a network security startup headquartered in Seattle.

The purchasers are Bain Capital Private Equity and Crosspoint Capital Partners.

Focus on Network Detection and Response

ExtraHop operates within the Network Detection and Response (NDR) market.

Their security offerings cater to organizations managing both cloud-based and on-premises assets.

This capability is particularly relevant as an increasing number of businesses navigate hybrid IT environments, as noted by Ron Miller and Alex Wilhelm.

From IPO Contender to Acquisition

Just twelve months prior, ExtraHop was nearing $100 million in Annual Recurring Revenue (ARR) and actively evaluating an Initial Public Offering (IPO).

To understand the circumstances surrounding this shift, Ron and Alex interviewed Jesse Rothstein, ExtraHop’s Chief Technology Officer and co-founder.

Rothstein provided insights into the deal’s formation and the rationale behind it.

We wish you a productive week and thank you for your readership.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

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Xometry Announces Plans for Public Offering

Xometry, a company headquartered in Maryland, is preparing to go public. The firm links businesses with manufacturers possessing unused production capabilities globally and submitted a Form S-1 to the U.S. Securities and Exchange Commission last week, formally declaring its intention.

Increased Demand During Supply Chain Disruptions

The tightening of the global supply chain in 2020, coinciding with the pandemic, likely resulted in increased demand for Xometry’s services. Companies were actively seeking solutions to locate available manufacturing resources.

Revenue Profile Analysis

Despite its growth trajectory, Xometry doesn't exhibit the characteristics of a typical, contemporary software business when examining its revenue quality. A closer look reveals distinctions in how its revenue is generated.

The company’s business model centers around facilitating connections between those needing manufacturing and those with available capacity. This approach differs from traditional software-as-a-service (SaaS) models.

Further analysis of Xometry’s financial data will be crucial for investors to fully understand its revenue streams and growth potential.

The Shift Towards Security Data Lakes for Enhanced Protection

Despite an average yearly expenditure of $18 million, most corporate security departments struggle to effectively deter breaches, intellectual property theft, and data compromise. A fundamental reason for this ineffectiveness lies in current strategies.

The prevailing, fragmented methodology employed within the security operations center (SOC) is proving inadequate. A transition is necessary, moving away from traditional security information and event management (SIEM) systems towards the implementation of security data lakes.

A decline in dependence on SIEM solutions is already observable, alongside numerous other evolving practices. While SIEMs aren't disappearing immediately, their function is undergoing a significant transformation.

They are now complemented by a crucial new component within the SOC – the security data lake.

Why the Current Approach Falls Short

Traditional security infrastructure often relies on siloed tools and data sources. This creates blind spots and hinders comprehensive threat detection.

Security data lakes offer a centralized repository for all security-related data, enabling more holistic analysis and improved incident response.

The Benefits of a Security Data Lake

• Enhanced Visibility: A single source of truth for all security data.
• Improved Threat Detection: Facilitates the identification of complex threats that might be missed by traditional SIEMs.
• Faster Incident Response: Enables quicker investigation and remediation of security incidents.
• Greater Flexibility: Supports a wider range of analytics and security use cases.

By consolidating data from various sources, security teams can gain a more complete understanding of their security posture. This allows for proactive threat hunting and more effective security controls.

The adoption of security data lakes represents a critical step forward in the ongoing effort to strengthen cybersecurity defenses. It’s a move towards a more data-driven and proactive security model.

China's Pursuit of Orbital Internet Competition with Starlink

Over the last few years, numerous companies have emerged with the ambition of delivering broadband internet access via a network of satellites in low-Earth orbit (LEO). This aims to provide connectivity across a significant portion of the globe.

Coinciding with the swift expansion of SpaceX’s Starlink constellation beginning in 2020, China has demonstrated a swift and comprehensive response. This response encompasses policy adjustments, financial investment, and technological advancements.

Currently in its nascent stages, a Chinese initiative often referred to as “SatNet,” alongside the GuoWang project, is poised to challenge Starlink and other providers in specific markets.

Beyond commercial competition, this endeavor also serves a crucial strategic function for the Chinese government.

The Rise of SatNet and GuoWang

Backed by substantial support from influential figures, the emergence of a Chinese satellite internet network – sometimes called Red Star – is anticipated in the coming years.

This network is expected to initially focus on providing coverage within China, but its potential reach extends globally.

The development of SatNet and GuoWang represents a significant investment in the future of internet infrastructure.

• LEO Satellites: Utilizing satellites in low-Earth orbit to minimize latency.
• Government Support: Receiving strong backing from high-level government officials.
• Strategic Importance: Serving both commercial and national security interests.

The competition between Starlink and the Chinese initiatives is expected to intensify as both networks mature and expand their coverage areas.

This rivalry will likely drive innovation and potentially lower costs for consumers worldwide.

Implications for the Future

The development of competing orbital internet networks has the potential to revolutionize global connectivity.

Increased access to broadband internet can facilitate economic growth, educational opportunities, and social inclusion.

However, it also raises important questions about spectrum allocation, orbital debris, and the potential for geopolitical tensions.

A Special Purpose Acquisition Company Backs British Firm's US Expansion Plans

Babylon Health, a health technology company originating in the United Kingdom, is aiming to become publicly traded in the United States through a merger with a SPAC (Special Purpose Acquisition Company).

As anticipation builds for Robinhood’s initial public offering, a detailed analysis was conducted by The Exchange.

Examining Babylon Health's Strategy

This analysis encompassed a review of the company’s funding rounds, its core product offerings, and its financial performance.

Furthermore, the projections made by Babylon Health were also carefully scrutinized.

Key Areas of Investigation

• Fundraising History: A comprehensive look at the capital raised by Babylon Health.
• Product Analysis: An in-depth evaluation of the features and functionality of Babylon’s health tech solutions.
• Financial Performance: A review of key metrics and indicators of the company’s financial health.
• Future Projections: Assessment of the company’s forecasts for growth and profitability.

The goal is to understand the potential impact of Babylon Health on the US healthcare landscape.

The company’s entry into the US market is being closely watched by industry observers.

The Undervalued Advantages of Including a CTO on Your Board

It is generally believed that a company’s board should consist of several CEOs capable of providing insightful guidance based on entrepreneurial experience.

However, according to Abby Kearns, the chief technology officer at Puppet, incorporating a technical leader offers substantial, often overlooked, benefits.

Technical Expertise and Realistic Planning

A CTO brings more than just a background in engineering to the table.

They are uniquely positioned to assist founders in establishing achievable project timelines and pinpointing critical areas of concern.

Furthermore, Kearns highlights their ability to offer “pragmatic empathy” during challenging and stressful circumstances.

Advocacy and Communication

CTOs can serve as powerful advocates for founding teams.

This is particularly valuable when explaining the reasons behind launch postponements or justifying the necessity of additional engineering personnel.

A technical leader possesses the ability to clearly articulate complex technical issues to non-technical board members.

“The core strength of a CTO lies in their deep understanding of the underlying technical details,” Kearns explains.

Benefits Summarized

• Realistic timeline assessment.
• Identification of key challenges.
• Effective communication of technical needs.
• Pragmatic support during high-pressure events.

Ultimately, adding a CTO to the board can significantly enhance a company’s strategic decision-making process.

6 Career Paths for Former Founders Charting a New Course

Individuals who have held the position of founder may encounter unique hurdles when pursuing conventional employment opportunities.

Having demonstrated a desire for company leadership, rather than simply career advancement, can sometimes make potential employers hesitant.

What strategies are available to those in this situation? This is particularly relevant if personal finances or the support of a partner necessitate a more stable income stream than a startup typically provides.

Below are six potential career avenues for former founders as they contemplate their subsequent steps.

1. Chief of Staff

Many startups and rapidly growing companies need a Chief of Staff to the CEO.

This role allows you to leverage your broad skillset and experience without the full weight of ownership.

You’ll be involved in everything, acting as a force multiplier for the CEO and helping to drive key initiatives.

2. Venture Capital

Transitioning to Venture Capital is a natural fit for many ex-founders.

Your experience building a company provides valuable insight into evaluating potential investments.

You understand the challenges startups face and can offer meaningful guidance to portfolio companies.

3. Corporate Development

Larger corporations often seek to acquire innovative startups.

A role in Corporate Development involves identifying, evaluating, and integrating these acquisitions.

Your founder background gives you a unique perspective on assessing the value and potential of target companies.

4. Product Management

If you enjoyed defining and building a product, Product Management could be a good fit.

You already possess a strong understanding of user needs and market dynamics.

This role allows you to focus on the product itself, without the operational complexities of running a company.

5. Consulting

Leverage your expertise by offering consulting services to startups and established businesses.

Consulting provides flexibility and the opportunity to work on a variety of projects.

You can specialize in areas where you have deep experience, such as fundraising, marketing, or product development.

6. Operating Roles in High-Growth Startups

Instead of leading, consider joining a high-growth startup in a key operating role.

This allows you to apply your skills and experience in a fast-paced environment without the pressure of being the founder.

Look for roles where you can have a significant impact and contribute to the company's success.

Expensify's Unique Path to SaaS Success: A Bottom-Up Sales Approach

This article, the concluding segment of Expensify’s EC-1 series, details the unconventional strategies employed by the company to achieve substantial growth.

Conventional wisdom suggests that an expense management solution would necessitate a robust sales force and extensive advertising campaigns to acquire customers. However, Expensify deliberately deviated from these established norms.

Remaining consistent with its independent approach, the company reached over $100 million in annual recurring revenue and amassed a significant user base with a comparatively small team.

Specifically, Expensify scaled to these heights with a staff of just 130 employees, supplemented by contractors, and maintaining a minimal sales presence.

The key to this remarkable expansion wasn't traditional sales tactics, but rather the power of word of mouth.

The Power of Organic Growth

Instead of actively pursuing customers, Expensify fostered an environment where users organically advocated for the platform.

This bottom-up sales model proved remarkably effective, allowing the company to bypass the costs and complexities associated with a large sales organization.

• Bottom-up sales focuses on individual users within organizations.
• Users then champion the product to their employers.
• This approach contrasts with traditional top-down sales strategies.

The success of Expensify demonstrates that a different path to scaling a SaaS business is possible.

A Contrarian Strategy

Expensify’s approach challenges the conventional belief that significant investment in sales and marketing is essential for rapid growth.

By prioritizing user experience and allowing the product to speak for itself, the company cultivated a loyal customer base that actively contributed to its expansion.