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Darktrace IPO set to float on London Stock Exchange

Darktrace is a UK-based cybersecurity firm, helping businesses to protect their data and networks through artificial intelligence and machine learning. The company is expected to float on the London Stock Exchange in the coming weeks, so you may wonder who they are and what exactly it is they do.

You may even be considering using Darktrace for your own business’s cybersecurity needs. Do keep in mind that cybersecurity is much more complex than a ‘one firm solves all’ problem, and quality cyber insurance is also important to make sure you’re properly protected against hacks, data breaches, and more. The National Cyber Security Centre also has some excellent resources for any business looking to up their cyber defence capabilities.

The last few years have been extremely strong for Darktrace, so anyone keeping track probably isn’t surprised an IPO was on the cards as they aim to fast-track the next stages of growth – hitting almost $200m in the year ending June 2020 (up from just under $140m the year prior) and more than doubling its number of paying customers in the past two years – impressive numbers, even by the standard of the modern tech market.

Before the IPO goes live, here’s a brief on everything you need to know about Darktrace in 3 minutes or less.

What exactly does Darktrace do?

Darktrace has created a series of artificial intelligence and machine learning tools that help to detect, prevent, and remove cybersecurity threats. To do so, they use their algorithms to monitor your networks constantly, creating a “pattern of life” that it can (without supervision) continue to track to ensure there’s nothing abnormal going on. It’ll track devices, networks, and systems, so there won’t be a stone unturned when it comes to potential security issues.

What might abnormal consist of? It could be as simple as an employee innocently trying to access an unsecured website, or as dangerous as an active cyber attack. Darktrace removes the need to constantly manually review the network and systems for unusual activity. With their ‘Antigena’ technology, Darktrace can now also subdue any common threats itself, with no user input, providing a well-rounded IT security product.

The nature of machine learning means it should (in theory) not require as much human input as other cybersecurity methods, potentially creating long-term savings for a business. Additionally, as the algorithm updates itself on the go you should be safer from new threats that may have been missed with outdated technology or network protections.

The Darktrace IPO

Darktrace enters the London market at an interesting time – concerns about Brexit have started to become realized as companies struggle with new import and export regulations and ongoing fears about the potential of public flotations in the London market after the recent Deliveroo IPO that dominated the headlines. Many investors are happy to wait and see what happens before jumping on board, which could lead to a lack of initial demand.

However, analysts are keen to point out that Darktrace’s initial valuation ($3bn-$4bn) is much more cautious than the price Deliveroo pitched out at. More optimistic analysts also point out that while Deliveroo relies on technology, Darktrace is the technology, and once a company trusts the Darktrace product (and relies on it for cybersecurity) it should be easy to retain and upsell existing contracts while bringing in new customers.

There’s no question they’ll be a few extra eyes on the flotation that there would have been a few years ago, as investors look to keep an eye on London’s appetite for new tech IPOs post-Deliveroo. Businesses considering a flotation in the future will also want to see how things go, to see whether or not London might be the best market for them.

Who is Mike Lynch?

Mike Lynch was one of the initial investors in Darktrace (through the venture capital firm he was a founding partner of, Invoke Capital) back in 2013. He recently became embroiled in the UK’s largest-ever fraud case, as American firm Hewlett Packard believes that Lynch inflated the value of software firm Autonomy (which HP bought for c. $11bn) pre-sale, resulting in them paying a higher price than was fair.

Given that he faces potential extradition to the US to face additional charges (and at the least, a decent length UK prison sentence) it’s unlikely he has an active role in Darktrace, and there isn’t any implication he’s been involved pre-IPO, but the impact of the negative press has already been felt, with US powerhouse Goldman Sachs declining to take a role in the IPO due to concerns about the ramifications of Lynch’s trial.

Ultimately, it remains to be seen how much of an impact Lynch’s involvement will have on the valuation post-IPO, but there can be no doubt anyone investing may have caution as a result.