Claroty Buys Startup Medigate, Raises $400M From SoftBank

‘We didn’t cover healthcare, and healthcare is under attack. It’s all part of our big play to go after the extended IoT,’ says Claroty CEO Yaniv Vardi about the acquisition of healthcare IoT security firm Medigate.

Claroty purchased healthcare IoT security startup Medigate and closed a $400 million Series E round co-led by SoftBank to broaden its vertical and geographic expertise.

The New York City-based industrial cybersecurity vendor has agreed to buy Brooklyn-based Medigate for $400 million to expand its physical security capabilities beyond the industrial and manufacturing spaces and into healthcare. Combining Claroty and Medigate will allow the company to offer robust security to hospitals and life sciences firms spanning both industrial systems and medical devices, the firm said.

“We didn’t cover healthcare, and healthcare is under attack,” Claroty CEO Yaniv Vardi told CRN. “It’s all part of our big play to go after the extended IoT.”

[Related: Industrial Security Firm Claroty Raises $140M Round, Last Before IPO]

The Medigate acquisition is largely being financed through proceeds from the Series E round, which was co-led by new investor SoftBank as well as existing investors Bessemer Venture Partners and Schneider Electric. Series E proceeds are also being used to create better dashboards and reports, fuel international expansion, and strengthen technology alliances, according to Vardi.

Like the industrial space, Vardi said many healthcare devices have proprietary protocols and weren’t designed with security in mind, with can make protection more challenges. Vardi said Medigate is clearly the leader in healthcare cybersecurity thanks to its relationships with hundreds of hospitals as well as a similar technology approach to Claroty focused on mapping and identifying assets on the network.

Medigate employs 130 people, according to LinkedIn, and Vardi said many folks on the technology side of the business come from the Israeli Defense Forces’ elite unit for cybersecurity, which is like Claroty. Medigate’s technology will be integrated into the Claroty platform in the near-term, and Vardi said existing healthcare and industrial customers won’t see any reduction in capabilities.

Existing Claroty life sciences customers like Pfizer will benefit from leveraging Medigate’s capability to better secure their clinical landscape, while Medigate’s existing hospital customers can tap into Claroty’s industrial expertise to safeguard their building management systems, Vardi said. Most customers are looking for a single, holistic platform capable of addressing all their physical security needs, he said.

Both Claroty and Medigate sell predominantly through the channel, and Vardi said there’s a significant number of MSSPs that already work with both companies today. Claroty partners will in the near future be able to cross-sell Medigate’s technology and vice versa, according to Vardi.

“The channel partners would prefer to have one platform to sell, support and service for their customers,” Vardi said. Claroty plans to use a portion of its Series E funding to enhance its go-to-market efforts and conduct joint marketing campaigns with channel partners, according to Vardi.

The United States is Claroty’s largest market today, but the company already has a presence in major European countries like the United Kingdom, Germany, France, and Italy as well as Asian markets like Australia, Singapore, Taiwan, Thailand, Vietnam, and Korea. Claroty’s wants to use SoftBank’s expertise to get a foothold in Japan and move into new markets in Europe, South America and Central America.

From a metrics standpoint, Vardi said Claroty plans to track customer satisfaction ratings among existing clients of both companies, progress on the product integration roadmap, and revenue and pipeline growth across the entire physical security ecosystem. Vardi anticipates the Medigate acquisition will allow Claroty to increase its market penetration as well as its total addressable market.

“This is the largest investment ever in this space,” Vardi said. “We’re looking to leverage this investment to tighten our relationships and our investment in our partnerships.”