5 Cybersecurity Startups That Recently Laid Off Workers

Later-stage security firms are pulling back on spending due to deteriorating market conditions. CRN compiles a sampling of recently announced layoffs.

By many measures, the cybersecurity sector in general is doing fine, despite economic storm clouds on the horizon.

Due to recent high-profile ransomware and other cyber-attacks, private-sector and public-sector demand for cybersecurity products has never been greater. Spending remains high on security products and services – and many officials believe the security sector should fare better than other tech segments in the event of an economic downturn.

But that doesn’t mean everything is hunky-dory within the security sector. Like other publicly traded tech companies, security firms have lately seen their stocks pounded on Wall Street.

And the Wall Street drubbing has largely dried up the IPO market – a fact that has disrupted the plans of security startups and their investors in general.

In the short-term, many later-stage security startups are being told to pull back on their spending, as a way to preserve their cash until markets recover and IPOs become an option again.

The net result: Some cybersecurity startups have recently begun laying off workers.

The following are five later-stage startups that have recently reduced their payrolls amid uncertain economic times:

* Lacework

* Cybereason

* Deep Instinct

* OneTrust

* Automox

Lacework

Last month’s news that Lacework was laying off an estimated 20 percent of its workforce hit the cybersecurity investment world like a thunderclap.

After all, the San Jose, Calif.-based Lacework, a cloud security firm founded in 2015, had raised $1.3 billion in new funding only six months prior, becoming one of the hottest cybersecurity companies in the world. The blockbuster Series D funding round was led by Sutter Hill Ventures, Altimeter Capital, D1 Capital Partners, and Tiger Global Management.

So what happened? Lacework co-CEOs David Hatfield and Jay Parikh said in a company blog post that the “very difficult decision” to reduce the company’s headcount was the result of a “seismic shift” in both the public and private markets.

“While we do not have control of the environment around us, we do have a responsibility to control how we operate our business and make changes as needed to best position the company for continued and long-term success,” the Lacework leaders wrote. “We have adjusted our plan to increase our cash runway through to profitability and significantly strengthened our balance sheet so we can be more opportunistic around investment opportunities and weather uncertainty in the macro environment.”

The number of employees who lost jobs at Lacework is thought to be around 200.

Cybereason

Only a week after Lacework shocked the cybersecurity community with its layoffs, another cash-rich security startup confirmed it was also slashing its payroll to save cash.

Endpoint-security firm Cybereason, which is based in Tel Aviv, Israel and Boston, said it was laying off 10 percent of its workforce, or more than 100 employees.

The move came only four months after Cybereason had filed for an IPO and less than a year after it raised an additional $325 million in funding, of which $275 million was raised via a Series F round, led by Liberty Strategic Capital, a VC firm founded by former U.S. Treasury Secretary Steven Mnuchin.

The layoff culprit? “As the bullish tech market conditions have turned and the tech IPO market has essentially closed, companies like us must now exercise more strict financial discipline and prioritize profitably over top line growth,” the company said in a statement.

But Cybereason, founded in 2012, defiantly concluded: “Our market traction remains strong as we continue to build a company that matters with long-term objectives in mind and plans for a tremendous outcome when the markets – and we – are ready.”

Deep Instinct

Deep Instinct’s move to cut its workforce by a reported 10 percent was the third major cybersecurity industry layoff in just two weeks.

Crunchbase first reported the Deep Instinct layoffs in early June, with CNBC later confirming the action. Officials at Deep Instinct, founded in 2015 and based in New York, could not be reached for comment by CRN.

Lane Bess, chairman of Deep Instinct, recently told CNBC that the company had to get more efficient with its sales operation.

“We took a look and said, ‘Where are we being most effective in the enterprise?‘” Bess said.. “Are we doing well in the low end of the market, where we have inside salespeople? No. Do we have channel partners that can get to that low end of the market? Yes.’”

Over the years, Deep Instinct, which uses artificial intelligence to detect and prevent malware, has raised more than $259 million in funding from investors including BlackRock and Millennium.

OneTrust

Software developer OneTrust become the fourth high-profile security startup to announce layoffs in recent weeks – and the sheer size of the reductions were stunning.

Founded in Atlanta about six years ago, OneTrust, provider of privacy, security and governance products, said that, as a result of a company reorganization, it was cutting its workforce by 950 people, or about 25 percent of the company.

“I know this news is surprising, especially as you heard last month that the business is on track with record quarters and increasing customer demand,” OneTrust chief executive Kabir Barday wrote in a blog post. “However, capital markets sentiment shifted to a more balanced approach between growth and profitability, and at this time, we have decided the best course of action is to reorganize to position OneTrust for continued long-term success.”

OneTrust’s layoffs came just over a year after it raised $210 million in new funding, led by led by SoftBank’s Vision Fund 2. The company has raised a total of $920 million.

Automox

The most recent security layoff announcement comes from Automox, a Boulder, Colo.-based cybersecurity firm that last year raised $110 million in Series C funding, led by Insight Partners, along with funds managed by Blackstone and existing investors Koch Disruptive Technologies and TechOperators.

In a post on LinkedIn, the company confirmed it was reducing its overall workforce. Once again, the reason cited: economic uncertainties.

“(Due) to the broader economic climate, we parted ways with a number of our very talented people,” the company said. “While Automox continues to be a growing business in a strong financial position, we are not immune to the challenges of the macroeconomic environment.”

Founded in 2015, the company didn’t provide a specific layoff number, but Layoffs Tracker reports Automox reduced its workforce by about 18 percent, or 75 employees.

Layoffs Tracker also reported Automox previously cut its workforce by about 10 percent in April.