Building out North American channel key part of Deep Instinct’s new $100 million Series D funding round

Deep Instinct started by selling direct, but has added an MSSP channel and a solution provider and distribution channel, which is about to land a major partner in North America.

Guy Caspi, Deep Instinct’s CEO

Today, New York City-based Deep Instinct is announcing that it has completed the raising of a $100 million Series D funding round. The new round doubles the investment to date, bringing the total funding to $200 million, and will be used as part of an aggressive growth strategy, which will include a significant channel expansion in North America.

Deep Instinct was registered as a company in Q3 of 2015, and had their first alpha in Q4 2017.

“Two and a half years after the company was founded, we secured a huge deal with HP against stiff competition,” said Guy Caspi, Deep Instinct’s CEO. “2020 was the big jump in terms of sales revenue for us.”

Until 2020, their focus was entirely on North America – really, on the U.S. market.

“We just started last year in Canada, and now have four customers there,” Caspi said. “We didn’t have anything in EMEA or Japan before last year, and we now have amazing teams in those places.”

Deep Instinct’s cybersecurity platform competes with EDR solutions in the endpoint security market, although they themselves cast their net broader than endpoints. Their differentiation is an end-to-end deep learning capability that focuses on providing threat prevention at very fast speeds, and with few false positives, which reduces the number of alerts by 99%. Deep Instinct unveiled a warranty offer against issuing false positives last month as a result.

“A good hacker in a window of between 1 minute and 3 minutes can probably hack into any organization in the U.S.,” Caspi said. “We provide effective prevention capabilities against this –  for endpoint, mobile, storage, perimeter, and any API in the organization. Machine learning algorithms still need many cyberanalysts. They still need connectivity to the cloud. And they are still an endpoint play. We don’t need any connectivity to the cloud, and we have no analysts. We focus on being the prevention phase of the attack. We are the Pfizer of cybersecurity.”

Deep Instinct goes to market with a four-pillared strategy. They started selling direct, and that is still a key part of their focus.

“Most of this funding round is about accelerating growth, and we will be investing there,” Caspi indicated. That’s particularly the case in their developing geos, where their internal teams are being further built out.

There are a couple of partner channels as well.

“We have a separate sales organization under the CRO for MSSPs,” Caspi said. “This is very much a unique play for Deep Instinct. We are the best fit for MSSPs. We are not stealing their business. We are protection. We are a service. In addition, CrowdStrike and Tanium don’t sell to MSSPs, because they see them as competitors. We are expensive compared to many MSSP products, but they can bundle around us to impact that. They also tend to serve the SMB market, which we do not with our direct force. That’s better to go after with MSSP partners.” Last summer, for instance, Deep Instinct launched a partnership with MSSP Netsurion.

The conventional channel is the third pillar.

“This is already a very impressive organization in EMEA and Japan,” Caspi stated. “We are in the process of building it in North America. This will be an important part of our Go-to-Market. We are not working with companies like Optiv, CDW, and IBM today – but we should be. We are close to signing some. We have been in discussions with large resellers and distributors in North America and are about to sign a large one.

Caspi said these channel companies have lost a huge amount of business from the collapse of Symantec and McAfee, and from the fact that Crowdstrike is pretty much working uniquely with Optiv.

“We are the only purpose-built deep learning framework in the world. Resellers can do very well, like they did 10-15 years ago with Symantec and McAfee.”

OEMs are the final component.

“With our agentless solution, we have a unique OEM play that can plug in as part of the architecture,” Caspi said.

Deep Instinct’s competitive strategy is different in the enterprise, compared to the midmarket.

“In the Fortune 500 and Global 2000, we come in as an augmentation play, around prevention, and position the company as another layer of security,” Caspi indicated. “The idea is that with some companies you must add to your security stack.”

The midmarket strategy is very different.

“Midmarket and below is a displacement strategy, because they don’t need EDR,” Caspi said. “The agentless side we sell into the network is sometimes a displacement strategy, and is sometimes supplementary, because agentless is a unique product.”

So how will the new $100 million be used to strengthen the Go-to-Market?

“In North America, we are going to spend more on marketing in all the marketing disciplines, including augmented reality and digital advertising,” Caspi noted. “That’s a very expensive spend in North America. In EMEA its all about expansion, as we want to double our presence in the coming year. This costs lots of money. We started in APJ 6-7 months ago and we are going to expand the business beyond Japan to other countries in the region.”

Caspi also added that 30-35% of the money is earmarked for engineering, “for other things we intend to do next.”

The Series D funding round was led by funds and accounts managed from BlackRock, with participation from Untitled Investments, The Tudor Group, an investment by Anne Wojcicki, and existing investors, including Millennium, Unbound, and Coatue Management.

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