Darktrace, a UK cyber security upstart that boasts links to GCHQ, is in talks with Silicon Valley investors to raise a war chest that would value it at $400m (£283m).
The funding round is expected to be finalised next month and would mean the company’s implied valuation has nearly quadrupled in less than a year. Negotiations are ongoing as to how much equity will be sold.
Sources close to the talks said Darktrace was seeking to top up its cash reserve in anticipation of a major downturn in technology venture capital funding.
Investors have piled money into start-ups at ambitious valuations in recent years. The herd of so-called technology unicorns – those valued at more than $1bn – is expected to face a brutal cull. A string of big names including the location app Foursquare and fitness gadget maker Jawbone have had to slash their valuations to raise cash.
Darktrace is understood to be growing rapidly despite a crowded field in cyber security, however. It makes technology that uses advanced probability algorithms to detect security threats in corporate networks.
The company, founded by former GCHQ staff and University of Cambridge maths academics, claims its approach is unique in being able to uncover previously unknown threats. Its majority shareholder is Invoke Capital, the technology investment firm set up the entrepreneur Mike Lynch after he sold his FTSE 100 software company Autonomy to Hewlett-Packard.
Mr Lynch and HP parted company acrimoniously a year after the £7.4bn deal and are now locked in a court battle over claims of sales fraud. Mr Lynch strongly denies the allegations.
According to its pitch to potential investors, Darktrace’s technology is rapidly gaining ground. It has more than 1,000 customers at typical prices of around $5,000 per month. Revenues increased five-fold last year and the company now employs more than 200, with new offices opening in San Francisco and New York.
Darktrace last raised money only last July from the American venture capital firm Summit Partners. It has not spent any of that $22.5m investment and is self-funding, according to one person familiar with its finances, but wants to ensure it has plenty in reserve to fuel further expansion as technology investors become stretched by bad bets.
The company has links to Britain’s security establishment but also to Mr Lynch’s earlier ventures.
Its advisory board includes Jonathan Evans, the former director general of MI5, while its chief technology officer Jack Stockdale worked at both Autonomy and Blinkx, its digital advertising spin-out. AIM-listed Blinkx, once worth nearly £1bn, has suffered a collapse in its valuation to only £73m following a short-selling attack amid shifts in online publishing.