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 identify the true investment whitespaces, the underserved and underinvested frontiers that are critical for 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 1 under LOI through two separate portfolios, both tracking to deliver strong returns.
Option3’s success lies in combining a deep heritage in the national security community with decades of experience in the investment industry. This combination has resulted in investments that range from seed to our most recent LOI for a mid-market buyout. Our portfolios comprise cutting edge companies focused on priority areas, often coming to us out of the national security ecosystem. Building on the momentum from two portfolios and seeking to leverage our deep operational strength. We now focus principally on control investments in mid-market companies, both through new direct investments and through our new C2 cybersecurity mid-market private equity fund, one of only a handful of cyber funds to focus beyond venture investing.
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:
Since its founding, Option3 has invested in nine companies, with one more under LOI. The deals range from early stage to buyout (pending), with four of them being control or joint-control investments. Half of the companies are located in the Washington DC/ Northern Virginia/ Maryland area, with the others spread from the Silicon Valley to Europe. Two of our earlier investments have been realized through company acquisition by recognized leaders in their product areas, while others have seen large unrealized value creation. Our investments have ranged from threat intelligence to data loss prevention – areas that have been prioritized at different times by our sector-selection methodology that is informed by underlying themes driving cybersecurity. Our biggest priorities today lie in protecting real world physical infrastructure, national security, healthcare, and cyber insurance.
Current investment themes include:
- Critical Infrastructure
- Industrial Controls
- Operational Technology
- Automotive Security
- Internet of Things/ IIOT
- Healthcare IT
- Cyber Risk Assessment
- Zero Trust
Option 3 Cyber Special Situations LLC (CS)
OPTION 3 CYBER INVESTMENTS LLC (C1)
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.
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.
Option3 Cyber Investments II, LP (C2)
Option3 Cyber Investments II, LP (“C2) differs from most cyber funds in that it seeks to make buyout or control; investments in mid-market companies. In particular, it focuses on those areas of national priority.
Focus on proven mid-market companies
Increased venture capital has fueled a significant increase in early-stage companies, and an increase (albeit smaller) in the mid-market. C2 focuses here, building the platforms of tomorrow.
Invest in Current U.S. National Cyber Priorities
C2 investments focus on areas pre-identified as priorities for the country and is informed by real world events from the push to upgrade America’s infrastructure, blowback from Ukraine, and challenges in the cyber insurance markets.
Control Investment and Active Option3 Management
We seek control in order to make those changes that are sometimes necessary for a company to grow to the next stage. Option3’s operating team brings prior operating experience including prior CEO, CFO, CIO, CMO, CTO roles.
C2 will start with 3 control investments, drawn either from the CS portfolio, or from additional “advance investments” by Option3 in 2022. These span from buyout (pending) and growth equity to a special situation investment that will deliver a new capability being created in partnership with a strategic consortium drawn from the AI, cyber and insurance industries.
Option3 Cyber Investments LLC (O3C1) and Prior Investment
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.
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