SD-WAN vendor Cato Networks scores $55M

SD-WAN vendor Cato Networks announced today that it has lined its coffers with a $55 million funding round to bring its total to $125 million.

The latest funding round was led by Lightspeed Venture Partners and also included current investors Aspect Ventures, Greylock Partners, Singtel Innov8, USVP and co-founders Shlomo Kramer and Gur Shatz.

"I think we're kind of set for a while," said CEO Kramer in an interview with FierceTelecom. "So between what was left from the previous funding led by Greylock, which we haven't exhausted yet, and the new funding from Lightspeed, I think we are set for the next few years."

Kramer said Tel Aviv-based Cato Networks will use some of the latest funding round to increase its 42 points of presence (POPs) in various global regions. Cato Networks is set to launch several POPs in Australia next week.

"We are at the scale-out phase," Kramer said. "So we'll definitely use the funding to scale our go-to-market as well as expand our engineering and operations teams to support the growing number of customers."

Among the 50-plus SD-WAN vendors, Cato Networks is unique because its security functions are in the cloud and its self-healing POPs don't require hardware. With Kramer's experience as a security expert, Cato has put more of a focus on security while other SD-WAN vendors are now working to incorporate more security virtual network functions (VNFs) into their SD-WAN solutions.

Because it's cloud-based, Cato Networks doesn't need edge devices, VNFs and standalone services that would normally hamper high-availability configurations in networks. Cato is solving high-availability issues with its distributed cloud-scale packet engine.

Kramer said that Cato is focused on moving up the value chain to serve larger enterprises and organizations. Last year, Cato Networks signed up its first 1,000-site organization and added several enterprises with more than 30,000 employees.

Cato's bookings increased by 352% year over year in 2018 with more than 300 enterprises connecting their branch locations across various verticals.

"Cato's growth and funding is indicative of the continues momentum exhibited in the SD-WAN market as enterprise across many different types of verticals around the globe continue to see the benefit that SD-WAN brings to their branch WAN networks in general," said Lee Doyle, principal analyst at Doyle Research, in an interview with FierceTelecom. "In specific, Cato's as-a- service model has become popular. "

The new round of funding will also help Cato Networks battle its primary competitors in the SD-WAN sector, which Kramer said was telcos. It was thought that SD-WAN would lead to the demise of the telcos' more expensive MPLS offerings, but instead most of them are offering various connectivity options that still include MPLS. Kramer said that the telcos are trying to preserve their MPLS-based revenue for as long as possible.

RELATED: Research says managed SD-WAN services market tops $282M in U.S.

According to Vertical Systems Group, carrier-grade managed SD-WAN services in the U.S. increased in the second half of last year to the tune of more than $282 million in revenue. Vertical Systems Group expects network operators to further ramp up their managed SD-WAN offerings.

Large service providers such as Orange and AT&T rely on their networks and partnerships with vendors such as VMware/VeloCloud and Cisco/Viptela to deliver various flavors of SD-WAN to their customers, but Kramer says Cato is more nimble than the telcos.

"What we are offering is managed SD-WAN services, but we offer them in a new way that is different than what the traditional telcos offer, which is essentially to give up all of the controls," Kramer said. "If something goes wrong, or even if you want to change the policy, you need to open a trouble ticket with your telco provider in order for that to happen, which is very different than what people are used to with modern cloud service solutions where they have a console in the cloud and they have full visibility and control of what is going on.

"That's the self-service model that we bring into this managed network services world. It's a huge benefit above the telco offerings."

Going forward, Kramer said that customers want more mobile applications that allow them to log securely into their networks using their own devices.