St. Petersburg cybersecurity firm raises $53 million

deepwatch, a St. Petersburg company that provides managed security services, has closed on a $53 million Series B investment led by Goldman Sachs.

ABS Capital partners, an existing investor, also participated in the deal.

The new funding will accelerate research and development for the company’s cloud security platform, as well as drive continued go-to-market growth and expansion of deepwatch’s partner ecosystem, a news release said.

As part of the deal, Holger Staude, a managing director of Goldman Sachs Growth, will join the deepwatch board.

The deepwatch funding single-handedly eclipsed the $50 million in venture capital backing for 10 local companies during the third quarter of 2020, announced Tuesday by Venture Monitor.

It’s the second eight-figure funding round for deepwatch, which has an office and security operations center in downtown St. Petersburg, as well as in Denver. The company raised $23 million in Series A funding last year from ABS Capital Partners.

“We’ve experienced remarkable growth since our inception. Our innovative, cloud first platform, advanced algorithms, and powerful maturity scoring capabilities backed by our relentless focus on customer outcomes are substantially changing modern SOC operations and clearly resonating with CISOs,” Charlie Thomas, CEO of deepwatch, said in the news release. “We’re extremely excited about the investment by Goldman Sachs to help the company meet the increased demand for our unique security value.”

deepwatch says it extends its customers’ cybersecurity teams and proactively advances the maturity of their security operations. That’s needed because companies face security risks, due to the acceleration of digital transformation and migration to the cloud, as well as rapid and constant changes in the threat landscape. There’s also a global shortage of cybersecurity experts. That’s driving the demand for outsourced security operations, deepwatch said. Outsourced security is a $25 billion market today and is expected to more than double to over $50 billion by 2025.

“The demand for managed security services is expected to grow as staffing and skill shortages, an ever-evolving threat landscape, and an increasing compliance burden lead companies of all sizes to offload their security needs to specialist providers like deepwatch,” said Morgan Gerlak of Goldman Sachs Growth, the dedicated growth equity team within The Goldman Sachs Group.

In 2017, Goldman Sachs invested $30 million in Clearwater cybersecurity firm KnowBe4. KnowBe4 subsequently received $300 million in a round led by KKR, a global investment firm, and reportedly is preparing to go public.

Other local security firms also have attracted a lot of investor interest. In 2020 alone:

• Ballast Point Ventures, a venture capital firm in Tampa, invested $4.85 million in Abacode, a Tampa managed security services provider, in January.

• In February, Spirion, a St. Petersburg data privacy firm, received $20 million in a follow-on investment from Riverside Company, Spirion’s private equity owner.

• In August, ReliaQuest in Tampa drew $300 million in a round led by KKR. 

Separately, Goldman Sachs also is backing Directed Capital, a St. Petersburg company that specializes in working with borrowers to turn around troubled commercial real estate mortgage loans.