Claroty secures $400 million in funding, as it widens its cybersecurity cover to the healthcare sector

Industrial cybersecurity firm Claroty announced Wednesday that it has raised US$400 million in Series E funding, taking its total funding to $635 million. It has also entered into an agreement to acquire healthcare IoT security company Medigate. With this deal, Claroty is looking at Extended IoT (XIoT) as the next step forward in its mission to secure all cyber-physical systems (CPS) across industrial, healthcare, and enterprise environments.

The $400 million Series E round will be used to finance the acquisition of Medigate, including the onboarding of Medigate employees and integrating the two product suites, Yaniv Vardi, CEO of Claroty, told Industrial Cyber. The deal is anticipated to close in the first quarter of next year, he added. 

Vardi also said that every current Medigate employee will initially transition to Claroty when the deal closes, which will grow Claroty’s global headcount by about 50 percent across the Americas, EMEA, and APAC. “We will continue to operate as separate companies until the deal closes. Medigate will then integrate into Claroty,” he added.

Medigate’s expertise and leadership in healthcare IoT security will complement Claroty’s existing IIoT/OT core offerings creating an all-inclusive solution that covers other types of IoT as well, including those in healthcare (IoMT) and enterprise (IoT) environments, Vardi said. “Together, Claroty and Medigate will combine our deep domain expertise and specialized technologies into a single platform that will extend across all types of CPS and connected devices to secure the Extended IoT (XIoT) that spans industrial, healthcare, and enterprise environments,” he added. 

Vardi said that joining forces with Medigate “enables us to extend the reach of The Claroty Platform to cover the broadest possible spectrum of customers’ most critical assets, not only across their industrial environments, but also healthcare and enterprise environments – i.e. the XIoT.” 

From traditional OT devices, such as PLCs and HMIs, to medical devices, such as MRI machines to enterprise IoT devices, such as smart security cameras and temperature sensors, the XIoT encompasses an ever-expanding range of connected assets that Claroty is now uniquely positioned to secure, he added.

Explaining why the New York-headquartered company decided on acquiring Medigate, Vardi said that for years Claroty has been a leader in the industrial cyber security market, as critical infrastructure becomes more connected and cyber risks increase. “As we look at the broader market landscape, the same is true in healthcare delivery organizations and other vertical markets. Hospitals have life-saving clinical equipment, like ventilators, MRIs, and infusion pumps that are at risk of being attacked and compromised,” he added.

“As we evaluated our strategy, we recognized that Claroty and Medigate together have an opportunity to protect the convergence of the cyber and physical worlds across all enterprises and verticals,” Vardi said. “Our research revealed Medigate to be the clear leader in healthcare security and clinical asset management,” he added.

Claroty’s Series E funding round was co-led by new investor SoftBank Vision Fund 2, along with existing investors Bessemer Venture Partners and Schneider Electric. Other existing investors, including ISTARI (a global cybersecurity platform established by Temasek), Team8, and Standard Investments, participated as well. In addition, Yossi Cohen, head of SoftBank’s investment activities in Israel, will join Claroty’s board of directors.

“As digital transformation initiatives drive the essential physical systems that we rely on for even the most basic human needs, securing these systems is ultimately about mitigating risks to human life,” Yossi Cohen of SoftBank Investment Advisers, said in a media statement. “Claroty’s technology addresses a high-stakes problem in enabling safe digital transformation, and we are eager to partner with the team in its journey to protect the critical infrastructure that is the foundation of the AI revolution.”

Vardi said that historically, critical infrastructure organizations’ default approach to securing CPS has been to implement highly specialized tools with deep domain expertise in specific devices from specific verticals. “These tools may be effective at securing their respective devices – but what about other devices? For example, what if a hospital upgrades to smart security cameras (which are enterprise IoT, not IoMT, devices)? How about if an electric company installs smart air quality sensors (which, similarly, are enterprise IoT, not OT, devices),” he said 

To this end, “our new funding and acquisition of Medigate will reinforce our fundamental commitment to industrial cybersecurity by further equipping us to meet customers’ needs now and in the future – no matter what types of assets connect to their environments as they evolve. The features, capabilities, and support that our customers know and love about Claroty are not going anywhere, and will only get better in the future,” Vardi added.

Identifying the new goals that Claroty has set for itself with the additional funding, Vardi said that “our mission was and is to secure the CPS of connected organizations. The first step to achieving this mission has always been to empower our customers to succeed in securing their industrial environments – and we have.” 

Now, heading into 2022, “we are focused on extending our industrial expertise across all types of CPS and connected devices, to secure the XIoT. In the short term, this will focus on incorporating both their team and product suite into ours, so that we can deliver on our combined value to our customers, Vardi added.

In June this year, Claroty secured its Series D financial round of $140 million and said at the time that it will use the funds to expand into new verticals and regions while working towards enhancing its product portfolio.

Another industrial cybersecurity company Dragos raised in October $200 million in Series D funding at a valuation of $1.7 billion, reflecting increasing demand for OT cyber security techniques and solutions. Rising investments in the industrial sector come at a time when the sector is witnessing growth, and the criticality of cybersecurity to critical infrastructure is not a new concept.

Anna Ribeiro

Industrial Cyber News Editor. Anna Ribeiro is a freelance journalist with over 14 years of experience in the areas of security, data storage, virtualization and IoT.