Avecto Expands in Boston as Endpoint Security Gets More Crowded

Earlier this year, Xconomy compiled a list and map of cybersecurity organizations in the Boston area and found 60-plus companies. One that we missed was Avecto, a U.K.-based endpoint security software firm that opened a Massachusetts outpost in 2009, a year after the company was founded.

Now Avecto is drawing more attention, both locally and abroad. The firm raised $49 million in December from JMI Equity—Avecto’s first outside funding—and is using that money to accelerate the growth of the business, market itself more aggressively, and expand its team.

The 180-person company plans to hire about 100 people worldwide between now and July 2017, with almost half of those new employees located in the U.S., says Avecto co-founder and co-CEO Paul Kenyon. About 35 of those new hires will be based in Avecto’s office in Somerville, MA, where 59 people currently work, he says. That office has grown rapidly since Avecto relocated there from a smaller space in nearby Cambridge last November.

“We’ve always been profitable. We never needed outside funding,” Kenyon says. “But at the point where you’re looking to grow at the rate where we are, then you start to get a little bit twitchy. The idea of underwriting that potential risk” by selling a minority stake in the business to JMI “made sense.”

Paul Kenyon

Paul Kenyon

Xconomy visited Avecto’s Somerville office near the Mystic River last week to learn more about the company’s plans, and to get Kenyon’s thoughts on the latest cybersecurity trends.

One of the takeaways was that Kenyon expects consolidation in the cybersecurity sector to continue. The industry is very noisy right now, and there’s lots of competition, he says. That makes it a good time to be a big company with deep pockets, as we’ve already seen this year with IBM purchasing Resilient Systems, Cisco Systems acquiring CloudLock, and Symantec snapping up Blue Coat.

“I think what you’ll see is familiar names with gaps in their portfolio that will start to buy smaller players,” Kenyon says.

Avecto’s biggest challenge is making its approach stand out in a crowded field of endpoint security companies, which aim to protect an organization’s network by focusing on the devices that access the network (think smartphones, laptops, and servers). Related companies include Carbon Black, CounterTack, and Promisec in the Boston area, as well as Cylance and CrowdStrike in California.

Avecto concentrates on what Kenyon characterizes as fundamental security measures: managing user privileges, allowing only approved applications to run, and isolating files and programs downloaded from untrusted sources before they can do any damage. Avecto’s software places potentially malicious documents or programs in a sort of digital container—separate from sensitive corporate data—where Avecto works to render the threats “inert,” Kenyon says.

“The idea is you’re going to get hit by viruses. Let’s get over that fact,” Kenyon says. “The question is, what’s going to happen when you get hit? Our technology is lowering the potency of those viruses that are going to get through.”

That message has resonated with Avecto’s 600-plus customers, which include law firms, universities, tech companies, and retailers. Avecto doesn’t share exact sales figures, but it says it increased revenues by an average of 50 percent annually from 2012 through 2015.

The company is doubling down on its investments in the U.S., which Kenyon considers the biggest market for Avecto’s products and services. The company announced today that its North American sales have grown 67 percent in the past year.

“There’s a large amount of opportunity out here, in terms of the number and size of” potential customers, Kenyon says. “It’s meant we could scale really quickly.”

Avecto has employees located across the U.S., in places like California, Texas, and Michigan, Kenyon says. But its only physical office space in America is in Massachusetts. Avecto picked the Boston area in part because it’s a smaller time difference with the company’s headquarters in Manchester, England, but also because of the abundance of talent at local cybersecurity firms and other tech companies, Kenyon says.

There are two sides to that coin, however. “There’s an awful lot of smart talent you can choose from” in Boston, Kenyon says. But “from a recruitment point of view, it means there’s a lot of competition.”

Avecto has responded in part by beefing up employee benefits and office amenities, Kenyon says, citing the Somerville office’s open floor plan and ping-pong table. The office is located in Assembly Row, a mixed-use development filled with offices, restaurants, shops, a movie theater, and condos.

“We’re constantly looking at how do we get people not just to join the business, but to stay and perform, because that’s what’s going to make the difference for our success going forward,” Kenyon says.

Jeff Engel is a senior editor at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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