AI is a data problem — Cyera is raising up to $300M on a $1.5B valuation to secure it

A cybersecurity startup called Cyera is betting that the next big challenge in enterprise data protection will be AI, and it’s raising a big round of funding as demand picks up for it.

The company — which builds AI-enhanced tools to create accurate pictures of where and how data is being used in organizations’ networks — is close to finalizing a round of nearly $300 million, tripling its valuation to $1.5 billion in the process, according to sources very close to the deal. Storied venture firm Coatue is leading the round of funding, say our sources, and Accel is also participating.

The deal is expected to be complete in early April. It’s not clear which other investors are participating in this round. Previous to this, Cyera — pronounced “Sierra” and headquartered in San Mateo and with roots in Israel — had raised a total of $160 million with its current $500 million valuation dating from last year.

Previous Cyera backers include Sequoia (which its first big round), Accel (which led its  $100 million round last June), Redpoint and the Israeli firms Cyberstarts and Cerca Partners, among others.

Cyera, Coatue and Sequoia declined comment. We’ve also asked Accel for comment.

There were rumors of this round circulating earlier this month. Since then, we can confirm that the amount being raised has increased by some $150 million, and before now, no investor names had been known.

This latest Cyera investment is notable on a couple of counts.

First, it underscores how cybersecurity — despite wider pressures in the technology economy and the venture market — continues to attract business, investors and big checks — even from firms like Coatue that have pulled back from some of their more exuberant bets. (Notably, Coatue shut a relatively new venture office in London earlier this year, a signal that it would be significantly less active in Europe going forward.)

Second, this round sheds new light on the huge role AI is playing in the technology market today.

Startups like OpenAI and Mistral continue to attract mega investments to build out large language models, and it’s rare to find an organization today that’s not evaluating how to use more AI in its business. But increasingly, information security teams are also recognizing the problems that AI can pose.

Yes, AI is being weaponized by malicious hackers to crack into networks, and it’s helping cybersecurity companies (like Cyera itself) to fight bad actors and get a better grip on enterprise data.

But more unwittingly, it’s playing a different part, too: Companies themselves, interacting with AI services like chatbots or generative AI applications, run the risk of breaching their own internal intellectual property and data protection policies. Cyera is setting out to address the latter of these scenarios, too.

A source said that AI right now is a “huge driver” for business at Cyera. But interestingly, the startup did not set out to build tools to identify how and where data would be exposed and potentially misused in AI applications per se.

Its focus initially was more general — working with companies in verticals like healthcare, technology, financial services, manufacturing, retail and travel, to provide tools for data classification, posture management (snapshots that help track how and where data is moving), detection and response, and access governance.

That business has driven, from what we understand, tens of millions of dollars in current ARR for the startup.

More recently, however, Cyera has been noticing a shift in what its customers are asking to track, a source tells us.

Many organizations are bringing more automation into their networks, and the concern is that this, too, will make it much harder to categorize and screen for the usage of sensitive data. “It’s all about everything that enterprises need to do to get ready for AI,” he said. “AI is a data problem.”