Option3 combines a cyber heritage from the classified world of national security with investment and M&A expertise from Wall Street to family offices, and operational experience spanning the C-suite. With a portfolio that includes earlier stage, growth and buyout (pending) deals, we primarily seek control investments in mid-market companies, particularly in areas that are national priorities as we build or
assemble leaders of tomorrow.
We primarily seek control investments in the growing cybersecurity mid-market, seeking to build champions with the scale to bring cutting-edge products to market efficiently, thereby ensuring the security and resiliency of the country.
Option3’s success lies in combining a deep heritage in the national security community with decades of experience in the investment industry. But our focus has evolved.
We started off making largely minority investments in earlier-stage companies but gradually moved to control or joint control investments, and now focus primarily on mid-market buyouts.
This shift reflects changing opportunities as the cybersecurity sector itself grew and matured, and also the investment experience of our management team which ranges from seed to IPO, and a demonstrated preference for active management and board control.
Investment and Operating Team
Over the past six years, we have successfully built a culture and team that integrates deep cyber expertise gained in the classified world of U.S. national security with investment and finance prowess that arises from decades at major Wall Street institutions, insurance companies, and family offices.
The team’s prior C-suite experience cuts across areas from finance to marketing and technology and has an active role in the lives of its portfolio companies, including multiple board seats on all recent investments.
For this team, it is understood that both money and mission are of equal importance. Together, the team has successfully managed nine investments, building deep institutional memory of deal origination, diligence and negotiation, followed by years of portfolio management and a growing base of real-world M&A exits.
We have built and refined the systems, processes, and benchmarks to the maturity necessary to run ever larger pools of capital. This was recently demonstrated when the team made an internal valuation metric publicly available, transforming it into the newest cybersecurity stock index available in the market today.
At the heart of Option3’s decision making is its Technology Board. This board assesses each investment we make, while understanding the greatest returns are achieved by focusing on companies and capabilities that America needs most in the next five years.
We do not come from the perspective of commercial technologists. We are people who have spent their lives fighting an unseen adversary, largely in the U.S. National Security Community, with former CIOs and board members of such organizations as the DoD, CIA, and NSA forming the core of the Option3 Technology Board.
Complementing this is a growing group of former CIOs and senior cyber executives from such companies as General Motors, CISCO, and Hewlett Packard.
We have built an ecosystem, both formal and informal, of expertise across multiple disciplines that we draw upon in our deal origination/diligence, fundraising, and in growing and ultimately exiting our portfolio companies.
The most visible part of this ecosystem is our Advisory Council, located both in the U.S. and in select aligned nations around the world that have capabilities in cybersecurity. The Council brings together domain expertise in legal, finance, marketing, insurance, public relations, and human resources.
Some of its members are listed below:
Our Investment History:
Since its founding, Option3 has invested in nine companies, with one more under LOI, roughly half in the Washington DC area with the balance spread from Silicon Valley to Europe.
The investments were largely made through two separate investment portfolios, C1 launched in 2016 and CS in 2020, and range from early stage to buyout (pending), with Option3 having control/joint control in four of them.
Three of these investments have been realized through company acquisition by recognized leaders in their product areas, with a fourth one now pending. We believe that other companies in the portfolio have seen large value creation.
Current Focus Investment Areas:
Zero Trust Platform
In late 2023, Option3 announced it was launching a Zero Trust cybersecurity platform that is tailored primarily for the federal, national security, and critical infrastructure sectors. The platform is a direct response to the Biden Administration’s 2021 Executive Order that mandates the federal government adopt Zero Trust. Its launch involves a unique ” Roll Up” of mid-market and earlier stage companies that combines both longstanding cybersecurity government contracting services and an arsenal of cutting edge new Zero Trust Technologies making them available seamlessly on a single platform. The new integrated company draws on Option3’s deep understanding of the needs of the federal customer and launches with over $100M in acquisitions.
Zero Trust is Not a Single Technology
The rise of the cloud, mobility and remote working (especially post-COVID) combined with heightened attacks by nation states, bad actors getting access inside the network perimeter has rendered the model of cybersecurity based around networks and perimeters increasingly ineffective. Zero Trust assumes that there is no traditional network edge. Importantly, it is not a single technology or product, but a framework and ecosystem of capabilities. In recent years, Zero Trust has become a critical component in contemporary cybersecurity strategies, addresses the blurred boundaries of companies in the post-COVID world. Option3 believes Zero Trust is likely to become the de facto global standard, particularly following the 2021 Presidential Executive Order mandating its adoption by the U.S. federal government.
Combining Both Heritage and Innovation
Option3’s concept of “Roll-Up” is not combining similar companies to build scale or market share but the acquisition of complementary Zero Trust products and solutions that can form a comprehensive suite of capabilities made available on a single architecture. It further combines these capabilities with the acquisition of specific professional services expertise required to design and implement Zero Trust deployments to the government’s exacting requirements.
The Roll Up starts with the acquisition of a longstanding Government Contactor that brings decades of federal cyber experience and the near simultaneous buyouts of two younger companies with cutting edge proven Zero Trust capabilities that are already in Option3’s portfolio.
This approach has allowed Option3 to assemble a platform that from its outset brings both longstanding federal cybersecurity experience and heritage as well as new Zero Trust capabilities that have already validated With both a common purpose and complementarity of technologies and expertise, the companies have seamlessly already begun advance work on what Option3 terms as the first “Military Grade Zero Trust” capability on the market.
Option3 Cyber Special Situations LLC (CS)
OPTION 3 CYBER INVESTMENTS LLC (C1)
Option3 Cyber Investments LLC (C1) was conceived and launched soon after the company’s founding in 2015 as its market debut investment fund and funded by the Firm’s partners and closely related investors. Its concentrated portfolio, comprising three venture investments, is tracking for returns far outpacing all benchmarks. As of early 2021, this vehicle’s estimated value is approximately $80M, following one exit and a large unrealized gain.
Provides automated cybersecurity threat remediation by aggregating and applying threat intelligence at a speed and scale unmatched today (providing real-time defense against known bad actors on the Internet).
Series A-2 Round
Provides a highly proprietary approach to software defined security that will accelerate the $1 trillion communications sector’s transfer from hardware to software, providing enterprises with network security at a scale well beyond the competition.
Image Risk Analytics
Watchful Software provides user-friendly, data-centric classification and keystroke dynamics that don’t impact your users. RightsWATCH and TypeWATCH are tailored to provide persistent security solutions that prevent accidental and malicious disclosure. As a result, your security protocols are enhanced and compliance becomes the rule.
Series A. Convertible Debt
Data Loss Prevention
Pioneered the application of artificial intelligence/ machine learning analytics to satellite/ drone imagery/ sensory data and big data to extract actionable, predictive business intelligence that was previously unobtainable.
Software Defined Networking
Next year we expect to launch C2, which will be structured as a fund, and our first diversified portfolio of size. The Fund will focus principally on mid-market buyouts and control growth equity investments in the cybersecurity sector. The focus on control investing reflects both the background of the Option3 management team, with prior roles across the C-suite, and the increasing control already being taken in our investments over the past few years.
Investments currently being evaluated by Option3 are either intended for its RESILIENT operating company or will likely be warehoused in short-term vehicles joining C2 in 2024.
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