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Local cybersecurity startups grow into IPO contenders

One Boston-area cybersecurity firm estimated Wednesday it would raise up to $80 million in an initial public offering of stock, and another raised $40 million to lay the groundwork for its own planned IPO.

The companies, CyberArk Software Inc. and Veracode Inc., are among those capitalizing on a torrent of expensive, high-profile data breaches that have vexed executives and consumers. They aim to join the ranks of established security software firms with a major Massachusetts presence including EMC-owned RSA, Kaspersky Lab, and Symantec.

CyberArk on Wednesday disclosed the probable financial terms for its IPO, signaling an intent to start trading its stock publicly within months. The firm aims to raise up to $80 million in the offering for expanding its business of stopping cyberattacks, selling approximately 5.36 million shares at $13 to $15 apiece. At those prices, the company would be valued at $380 million to $440 million. CyberArk is based in Israel but has its US headquarters in Newton.

Burlington-based Veracode on Thursday announced $40 million in new funding to fuel further growth, one of the largest rounds of venture capital funding secured by a Boston-area tech company in 2014. Chief executive Bob Brennan said the money should be the last raised by the firm prior to seeking an IPO, which could happen within the next year. Veracode expects its 2014 revenues to far outpace the more than $45 million it generated last year.


“The increasing frequency of breaches across Web apps and mobile apps does accrue beneficially to Veracode,” said Brennan, formerly the chief executive of Boston-based Iron Mountain Inc.

Headline-making data breaches in the past year have occurred at Target, Home Depot, and eBay, while the widespread Heartbleed flaw led to at least one case of stolen data. Hackers also accessed photos from the Apple iCloud accounts of several celebrities. A recent report, from the research group Center for Strategic and International Studies and antivirus firm McAfee, estimates the cost of global cybercrime at $445 billion last year.


In Massachusetts, state officials say nearly one in five residents had personal or financial information stolen in data breaches last year.

CyberArk specializes in providing security from cyberattacks launched from inside an organization, rather than from outside its perimeter.

The firm’s main product is a “digital vault” whose objective is to prevent cyberattackers from accessing especially privileged accounts.

The company, which was founded in 1999, aims to follow other Boston-area tech firms going public this year — caregiver marketplace Care.com and health IT firm Imprivata . Boston e-commerce firm Wayfair and Cambridge software firm HubSpot also have filed papers for an IPO this fall.

CyberArk is the first in the tech industry to set IPO terms since Chinese e-commerce giant Alibaba did so last week. Alibaba said it expected to raise as much as $21.1 billion when it goes public, which would top Facebook’s $16 billion in 2012 as the biggest technology IPO yet.

Top shareholders in CyberArk include Goldman Sachs, which led a $40 million round for the firm in 2011. The company plans to list its shares on the Nasdaq Stock Market under the symbol “CYBR.”

Revenue for CyberArk was $38.7 million for the first half of this year, up 33 percent from the same period a year earlier. The company broke even during the period after earning a profit of $2.7 million during the first half of 2013.


Veracode says its application scanning technology is used by large companies to ensure that cyberattacks don’t take place through flaws in their Web and mobile software, as was the case with Heartbleed.

Veracode’s new funding was led by Boston-based Wellington Management and included a number of previous investors, among them local venture capital firms .406 Ventures and Atlas Venture. Veracode has raised $112 million since its launch in 2006.

Kyle Alspach can be reached at kyle.alspach@globe.com. Follow him on Twitter @KyleAlspach and on betaboston.com.