Sumo Logic In Talks To Acquire Cybersecurity Startup JASK: Sources

Early-stage cloud-native SIEM vendor JASK has significantly reduced its headcount this year, particularly on the go-to-market side of its business, sources told CRN.

Data analytics vendor Sumo Logic is in negotiations with JASK about purchasing the four-year-old cybersecurity startup, according to multiple sources familiar with the situation.

JASK began shopping for a suitor in June or July since the company’s venture capital backers were looking for an exit, one source told CRN. A second source heard about conversations between Sumo Logic and JASK in recent weeks, while a third source told CRN that a deal between the two companies is about to happen.

A fourth source, meanwhile, heard that JASK would be making a significant announcement on Nov. 1. The cloud-native SIEM (security information and event management) provider has raised $39 million in three rounds of outside equity since its founding in 2015, with the most recent $25 million infusion from Kleiner Perkins coming in June 2018.

[Related: Data Analytics Vendor Sumo Logic Raises $110M To Fuel More Growth]

Sumo Logic, JASK, and Kleiner Perkins did not respond to multiple requests for comment.

JASK scaled up quickly in late 2017 and early 2018, moving aggressively to hire high-profile sales and engineering leaders from elite security vendors, the first source said. The rate of hiring went beyond that of most early-stage startups, which the source said typically move more methodically and wait until they have a proof of concept and functional product in the marketplace before hiring top sales leaders.

“They were spending a lot of money,” the first source told CRN. “It’s like they were building the airplane as they were trying to take off from the runway.”

The reckoning for Austin, Texas-based JASK came in 2019, several sources told CRN, with the company experiencing significant reductions in headcount, particularly on the go-to-market side of the business. The company took a huge step back from the channel and cut a bunch of people from its sales organization earlier this year in an effort to right-size operating expenses, the first source said.

“Their product wasn’t yet ready for the market,” the first source said.

The layoffs continued into this month, the fourth source told CRN, with a number of non-revenue producing sales and channel marketing personnel let go just last week. The source said that JASK’s technical and support staff have been less affected by the job cuts.

The second source said many of the personnel reductions stemmed from JASK realigning its strategy to be more purely focused on SIEM. The narrowing of JASK’s focus brought it more into direct competition with the likes of legacy SIEM players like Splunk and AT&T Cybersecurity as well as next-generation players like Alert Logic, according to the fourth source.

Job data from LinkedIn backs up those assertions, indicating that JASK has reduced its headcount by 26 percent in 2019 from 141 people in January to 104 people this month. JASK’s sales and business development teams have been cut by 37 percent and 29 percent over the past year, respectively, while engineering headcount has been reduced by a more modest 23 percent, according to LinkedIn.

Several high-profile JASK executives have also left the company over the past year. The first dominoes fell in November 2018, when Marc Davis, vice president of channels and alliances, left JASK for a role at Davmar Consulting.

In February 2019, Chief Marketing Officer Greg Fitzgerald departed from JASK as did Vice President of Technical Product Management Christopher Clark, who became CTO at King & Union (he has since left that role). And in September, former JASK Vice President of Worldwide Channels Jessica Couto took the Americas channel chief position at Vectra.

It’s been a very different story at Redwood City, Calif.-based Sumo Logic, which has grown its headcount by 23 percent in 2019, according to LinkedIn, going from 594 employees in January to 731 employees this month. The SaaS machine data analytics company raised $110 million in a June round led by Battery Ventures, and has notched more than $100 million of annual revenue and a valuation of $1 billion.

A Sumo Logic-JASK deal would have some similarities to recent acquisitions of early-stage Security Orchestration, Automation and Response (SOAR) players, the second source said, including Microsoft’s $100 million purchase of Hexadite in May 2017, Palo Alto Network’s $560 million buy of Demisto in February 2019, and FireEye’s $250 million buy of Verodin in May 2019.

Buying early-stage players allows legacy vendors to get into security orchestration and automation more quickly than if they had to build the technology themselves, the second source said, and is easier to pull off from a financing standpoint than purchasing a more mature organization.

Sumo Logic already has some SIEM and cloud initiatives, the source said, and buying JASK would accelerate their cloud development and log management capabilities for customers. Platform players often swoop in to buy startups once their technology has been developed and is being sold to customers, the second source said.

The first source said it was a struggle to get JASK’s product to work successfully during early customer demos. Although JASK’s promise of an autonomous Security Operations Center (SOC) resulted in extensive customer interest and meetings, the source said customers would regularly get cold feet after the proof of concept was attempted.

A fifth source - who also heard over the summer that JASK was looking for a buyer - told CRN that the company had struggled with building a managed detection and response (MDR) service around its SIEM offering. Investors, though, prefer to fund software development due to the associated product licensing margins rather than services, which they don’t see as being margin rich, the source said.

But in order to make SIEM broadly accessible to the market, the source said vendors need to either hire or partner with people that can deliver managed services around the product.

The fourth source said JASK has in recent months experienced success selling its SIEM platform to customers with as many as 25,000 or 30,000 users thanks to its functionality out of the box without much customization and fixed-fee pricing model. Competing SIEM products typically end up being more expensive for customers since they end up charging by the megabyte or petabyte, the source said.

The source, though, is frustrated that a channel program has never really materialized at JASK due to the company’s “growing pains.” The source hopes that getting bought by a larger, more established organization like Sumo Logic would lead to a more structured and organized program for JASK’s channel community.