Cybersecurity Private Equity

Cyber TRUST™ Index

157

-2

52 Week

166

135

Index at 100 on January 1, 2020

TRUST INDEX IN PROCESS
OF BEING UPDATED- EXPECTED
COMPLETION FEB 23

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.

About Option3

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.

We founded Option3 in 2015 as a specialist cybersecurity investment firm with the mission to make high risk-adjusted returns by investing in those companies and capabilities that America most needed in the coming five years. In that time, we have invested in 9 companies, with three successful exits and a further four pending.

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.

Manish Thakur

Managing Partner

Lisa Donnan

Operating Partner

Dr. Peter Fonash

Chief Technology Officer

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Anannya Lohia

Principal

Abhijeet Mahajan

Principal

Jason Holley

Jason Holley

Press Contact

Jack McMahon

Jack McMahon

Analyst

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Shail Shukla

Analyst

Technology Board

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.

John Stenbit

Former U.S. Assistant Secretary of Defense and Current Advisory Board member of NSA

Alan Wade

Former Chief Information Officer of CIA

Greg Akers

Former SVP Advanced Security initiatives, CISCO

Advisory Council

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:

Sean Plankey

Former Principal Deputy Assistant Secretary, Office of Cybersecurity, Energy Security and Emergency Response, Department of Energy.

Jennifer Fearon

Managing Partner of VentureLink Advisers, a corporate finance, business and financial consulting firm. Advising Option3 since 2016.

Christopher Carolan

Partner at Baker & Hostetler LLP. Advisor to Option3 since its founding.

Jamil Sopher

Family Office Investor, early entrant into cyber sector. First outside investor in Option3. Former Senior Project Manager, World Bank.

Our Investment History:

Since its founding, Option3 has made 8 venture stage investments with 4 buyouts / growth investments underway. In total current investments and deals that are under way exceed $100m in assets under management. 

Our investments to date have been largely made through two investment vehicles that we have managed since 2016. We launched a third vehicle launched in late 2023 that is engaging in a Roll-Up of existing companies, which includes buying the remaining assets of our second vehicle. We plan to also launch two entirely new investment vehicles in 2024.

The portfolios of our various investment vehicles reflect Option3’s evolving investment focus from earlier stage venture to buyouts or control investments in the mid-market, and include Option3 directly creating new cybersecurity companies, whether through Roll-Up or standalone.

 

  • C1 (2016): portfolio of 3 minority investments in earlier-stage companies.

·       CS (2020): “Special Situations” portfolio of 4 minority stakes, some with board control. The remaining portfolio is now being sold to our CR platform.

·        CR (2023): a single platform, formed by a Roll-Up that starts with the buyouts of the CS companies, adding other earlier-stage and mid-market Zero Trust companies.

 

Option3 is currently working on launching two more initiatives in 2024.

CD (2024E): a dynamic new concept seeking to transform the field of cyber insurance, created in partnership with the insurance, cyber, and AI industries.

 

C2 (2024E): one of only a handful of diversified funds exclusively making private equity investments in cyber, and possibly the only one focused on the mid-market.

 

The CS portfolio has been valued and closed, with investors being bought out by our new Zero Trust platform Roll-Up. The CS portfolio registered a performance far in excess of both overall market or its most directly comparable benchmark index. 

Since 2016, we have exited three of our investments, all through sales to strategic buyers. We currently are exiting four more investments, including our remaining 3 positions in the CS portfolio which have been independently valued ahead of their sale to our CR Zero Trust platform. Upon Close, Option3 would have exited its CS portfolio entirely. 

Current Focus Investment Areas:

In terms of sub-sectors where we have invested, we focus on technologies, markets and themes established by our Technology Board, with investments to date spanning Data Loss Prevention to Threat Intelligence. Current focus areas include:

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.

Platform Combines 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.

Portfolio Companies:

Option3 Cyber Special Situations LLC (CS)

Dellfer

Dellfer protected connected devices and apps act as threat sensors. With Dellfer’s comprehensive and continuous protection your connected devices and apps remain safe. The key to cyberattack detection and prevention is awareness.

Series A Round

Joint Lead

Automotive Security

Onclave

Onclave brings the same level of protection to IoT that our military and Intelligence communities employ to protect our nation’s most critical assets.

Series B Round

Co-Investor

IoT/OT Security

Veracity

Veracity’s resilient software-defined industrial network provides an on premises, centralized configuration, control and monitoring solution that tracks all connected devices and their communications.

Series A Round

Joint Lead

Industrial Controls

Dark Cubed

Dark Cubed is a powerful and easy-to-use cyber security software as a service (SaaS) platform that deploys instantly and delivers enterprise-grade threat identification and protection at a fraction of the cost.

Series A Round

Lead Investor

SMB Threat Intelligence
Cyber Insurance

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.

Centripetal Networks

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).

Awarded largest patent award in history

Series A-2 Round

Threat Intelligence

Certes Networks

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.

Series A Round co-investor

Image Risk Analytics

Successful Exits

Watchful Software

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.

Sold to Symantec

Series A. Convertible Debt

Data Loss Prevention

Logo of OmniEarth

OmniEarth

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.

Sold to Eagleview Technologies

Software Defined Networking

Dark Cubed

Dark Cubed is a powerful and easy-to-use cyber security software as a service (SaaS) platform that deploys instantly and delivers enterprise-grade threat identification and protection at a fraction of the cost.

Sold to Celerium

SMB Threat Intelligence

Cyber Insurance

Funds

Option3 has invested largely out of two small, concentrated portfolios, both structured as Special Purpose Vehicles and is preparing for its first diversified fund to launch in mid-2024:

C1

Launched at the end of 2015 within months of Option3’s founding, C1 was our debut investment portfolio, funded largely by the Firm’s partners and closely related investors. Its concentrated portfolio comprises three venture investments. C1 saw a successful first exit within a year, and its largest investment has realized gains through a patent portfolio that it is currently actively defending in court.

CS

Launched in 2020 as a “Special Situations” portfolio in light of the extraordinary circumstances brought on by the COVID pandemic. CS started similarly in size to C1, quickly doubling, with four investments today. With one successful exit and one underway, CS was always seen as a short-term vehicle. The portfolio is currently being sold at fair market value to Option3 RESILIENT, our new defense platform, with one company having already exited and another underway. Based upon our forecasts, we expect CS returns to compare very favorably with relevant benchmarks, and many of its investors continuing on as investors in RESILIENT.

C2

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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