WSJ: Netcraft Raises $100 Million From Spectrum Equity

Artificial intelligence is a key area of development for cybersecurity company Netcraft, which uses AI tools to search for critical information used to block attacks.

Cybersecurity company Netcraft has secured a $100 million investment from growth-investment firm Spectrum Equity Management and appointed a new chief executive, as the financial-crime disruption company seeks to grow its U.S. business.

Netcraft, which says it analyzes over 5 million threat reports and suspicious web addresses a day, uses automation to gather information on suspected attacks and identify parties involved in its infrastructure, such as web hosts and domain registrars, to initiate takedown procedures.

Along with the growth-equity investment, the London-based company named Ryan Woodley as its new CEO. Woodley started in April. He has held senior executive positions at security company DigiCert as well as Progressive Leasing, which rents household products in lease-to-own arrangements. Woodley replaces Mike Prettejohn, the company’s founder, who has joined Netcraft’s board.

Netcraft, founded in 1994, does business in 100 countries, claiming 10 of the 20 largest banks in Europe as its customers, Woodley said. The company has largely relied on word-of-mouth from existing customers to grow, he said. The investment from Spectrum Equity will allow Netcraft to build dedicated sales and marketing teams for the first time. Netcraft also plans to further develop its technology.

“I feel like in cyber it’s rare to come across companies that have been so product-engineering oriented. Up until our investment point, almost everyone in the company were engineers,” said Parag Khandelwal, managing director of Spectrum Equity. The firm, based in Boston and San Francisco, previously invested in cybercrime-related companies including World-Check and Verafin, which handle know-your-customer checks for financial institutions.

Netcraft is developing ways it can use artificial intelligence to help defend companies from hackers, Woodley said. As cybercrime becomes more complex, criminals are using AI to assist with scams such as pig butchering, where scammers build a digital relationship with a victim before convincing them to invest in fraudulent cryptocurrency schemes.

The use of generative AI platforms such as OpenAI’s ChatGPT is also giving criminals a helping hand in areas such as phishing, experts say, by removing mistakes in grammar and style that can otherwise identify suspicious email.

Defensive tools can use AI to analyze attacks or engage with attackers to secure pieces of information—a bitcoin wallet address, for instance, or other identifying data—which can then be used in a takedown, Woodley said.

AI can quickly analyze reams of data such as communications logs and phishing emails, which would be impossible for a human to do at speed.

“The information that you can extract there is very valuable, but it’s just not feasible to do it manually,” he said.

Netcraft plans to increase its team by around 30%, Woodley said, and expand business in the U.S., which currently accounts for around 25% of its revenue.

Article written by James Rundle, WSJ

The specific companies identified above do not represent all of Spectrum’s investments, and no assumptions should be made that any investments identified were or will be profitable. View the complete list of our portfolio companies. Spectrum is not responsible for the contents of any third party website linked above, and has not confirmed the accuracy of any information provided therein.