“This is World War III without the bullets and the bombs,” said Cirino, managing partner at the Boston venture capital firm 406 Ventures.
Cirino’s investment portfolio includes startup firms that are supposed to help businesses and governments defend themselves against online threats that are ever more sophisticated.
Much of the weaponry in this digital war is made in Massachusetts. The Commonwealth is home to dozens of network security companies. Some are world-famous, like RSA, a business unit of the data storage giant EMC Corp., Akamai Technologies Inc., and Raytheon Co. But the state also hosts a horde of venture-funded startups, some of them on the verge of going public.
Rapid7 is due to go first. The Boston company filed for an initial public offering of stock in June, at an expected valuation of $80 million. This month, it amended the filing, raising its target valuation to $111 million. Rapid7 declined to comment on the filing.
Another security company, Burlington-based Veracode, is also keeping mum about a report by Fortune magazine that it has filed to go public this year, under a law that allows startup companies to keep their IPO filings confidential.
Still other security companies are getting fresh funding.
In May, Cybereason, a Cambridge company whose software detects network intruders, rounded up an additional $25 million from Charles River Ventures and the defense contractor Lockheed Martin.
In June, CounterTack, a Waltham company, closed on $15 million more.
And a new Boston security company called Barkly got $12.5 million.
This surge of investment comes at a time of surging concern about network security. The recently revealed theft of personal data on 22 million Americans from the federal Office of Personnel Management is just another in a series of massive attacks on critical computer networks.
Desperate to protect themselves, governments and businesses are opening their checkbooks. According to Gartner Inc., a market research firm, worldwide sales of computer security products and services will reach $80 billion this year and soar to $93 billion two years from now.
“The cybersecurity market is arguably the hottest market in the world right now,” said Eric Schurr, chief marketing officer at Bit9 Inc., a security company in Waltham. “It’s a very difficult problem to solve, it’s gratifying to solve . . . and there’s a lot of money to be made in it, too.”
Bit9 is rumored to be on the verge of its own IPO. For now, it is enjoying a growth spurt. The company boasts 1,400 clients, up 70 percent since 2013. And it’s hiring engineers as fast as it can. “I think last year we hired 120, 130 people,” Schurr said. “This year we’ve hired close to 70.”
“Massachusetts has always been strong in security,” said Cirino, managing partner at the Boston venture capital firm 406 Ventures. Apart from the best-known players, the state hosts US offices of big overseas security companies such as Russia’s Kaspersky Lab and Sophos Ltd. of the United Kingdom. And the state has an array of startups that have moved in from afar, ranging from Vermont-founded Pwnie Express to the Israeli-born security firms Cybereason, ObserveIT, and CyberArk, which raised $86 million when it went public in September.
“Most Israeli companies were going off to Silicon Valley,” said CyberArk’s chief executive, Udi Mokady. “But we found that this was a great place to be.” There was easy access to New York, a major market for the company’s products, as well as the sizable pool of engineering talent from world-class schools like Harvard and the Massachusetts Institute of Technology. In addition, “I dare say that Boston benefits from a more sane and loyal workforce than in Silicon Valley,” Mokady said.
Izhar Armony, a venture capitalist at Charles River Ventures and an investor in Cybereason, said that startups also come to Massachusetts in search of executive talent. “Many of these companies are being started by a very small team,” Armony said. “They actually always lack the sales and marketing talent.”
But in the Bay State, these startups can find veterans of well-established local companies who know how to sell software.
Armony said its combination of managerial and technical talent has enabled Boston-area companies to more than hold their own against Silicon Valley rivals. “I think security is a rare sector where Boston is a net attractor of talent, versus a net loser of talent,” he said.