Boardroom IntelligenceCategory

Cato Networks’ Head of Strategy on Product Differentiation and the IPO Roadmap

By Jefferies Editorial Team
3 min read

In September 2023, Jefferies hosted its seventh annual Tech Trek, Israel’s largest institutional investor conference. The three-day event connects leading global investors with the Israeli tech ecosystem through a series of panels, presentations, and meetings.

At the conference, Jefferies spoke with Yishay Yovel, Chief Strategy Officer at Cato Networks. Cato, an Israeli-based SASE platform company with converged networking, security, and mobility capabilities, is one of the tech ecosystem’s most anticipated IPOs. In September 2023, Cato announced a $238 million equity investment, valuing the company at over $3 billion.

Yovel shared insights on Cato’s strategy for building a differentiated product in an already developed sector; Cato’s “rip-and-replace” approach; achieving resilience in turbulent markets; and the company’s path to going public.

Note:  The following interview preceded the events of October 7th and does not take into account the effects of the ongoing conflict.

Achieving Growth in Mature Markets: Cato’s Strategy

Founded in 2015, Cato Networks reached $100 million in annual recurring revenue (ARR) in 2022, growing its ARR from $1 million to $100 million in just five years. Serial entrepreneur Shlomo Kramer, founder and CEO of Cato, previously led cybersecurity startups Check Point and Imperva to multi-billion-dollar IPOs. Cato’s cloud-native architecture combines enterprise networking and network security within a secure access service edge (SASE) framework. Today, more than 2,100 enterprises across 150 countries have adopted the Cato SASE Cloud.

Yovel spoke to the company’s unprecedented growth in the network security sector, which, at the time of Cato’s founding, was already dense with cloud solutions from major providers.

“Most companies grow by building a point solution for a point problem. Our approach was different,” Yovel explained. “Enterprises have a difficult time managing multiple products with separate capabilities. We took a step back and asked, ‘Why is there so much complexity in networking and security infrastructure, and can we simplify it with a single-product architecture?’

That became the vision for Cato: a turnkey networking and security infrastructure that is scalable and addresses multiple needs.

This “rip-and-replace” strategy became the backbone of Cato’s growth. It involves not just substituting one legacy solution with a cloud alternative, but migrating multiple point products, appliances and cloud services, into a single, cloud-native software stack. Cato’s framework has gained significant traction in the industry, with leaders like Gartner and Forrester now recommending a SASE solution for their network security clients.

Developing Durable Products in Uncertain Markets

Cato’s growth overlapped a challenging period for global markets; in the wake of the COVID-19 pandemic, cost reduction became a priority for many businesses. Though enterprise security is typically viewed as a resilient operating expense, cost centers like the SASE Cloud remained vulnerable to budget cuts. Yovel, addressing this challenge, explained Cato’s approach to building resilient products by prioritizing total cost of ownership (TCO) from the start.

Yovel detailed Cato’s unique sales approach, sharing that “Cato’s projects are essentially funded by existing budgets. We approach companies with separate allocations for firewalls, remote access, and networking infrastructure, and we demonstrate how these budgets can be consolidated into Cato’s solution. Even in challenging economic times, our value proposition is resilient, because we help businesses invest less and get more.”

The Path to Going Public: What’s Next for Cato?

Discussing Cato’s future, Yovel addressed the question on many investors’ minds: when is the company planning to go public?

Shlomo Kramer is on track to be the first founder to lead three cybersecurity companies from seed stage to multi-billion-dollar IPOs. He has discussed a potential IPO in the fourth quarter of 2024, depending on market conditions.

“We want to go public, if market conditions allow it, in the next 12 to 18 months,” Yovel stated. “We have the growth rate and numbers to support this. We just need to find the right opportunity in public markets.”

While predicting the exact timing and specifics of a potential IPO is difficult, the company’s trajectory, product resilience, and focus on growth position it for longtime leadership in network security.