Working from home has fueled a hot market in endpoint security for computer networks. What was an $12.8 billion market in 2019 is expected to grow to $18.4 billion by 2024. That’s one of factors driving interest among those looking to invest in SentinelOne stock.
Behind that interest in endpoint security is a global spike in cyber crime. It was already on the rise before the novel coronavirus hit. But with more people logging in to their offices from home, and with lockdowns leaving many with more time on their hands to get into trouble, the FBI has seen reports of this activity jump to four times levels seen last year.
SentinelOne provides machine learning and artificial intelligence solutions for monitoring and securing endpoint devices. What are endpoint devices? Things like laptops, smartphones and other connected tech. Working from home has merged with bring-your-own-device trends, creating the potential for havoc. Companies need to ensure a central management strategy and tools are in place.
The California-based cloud computing and AI firm landed last month for the first time on CNBC’s Disruptor 50 list, at No. 31.
Cyber Crime Threatens All Enterprises
So why exactly is SentinelOne generating so much excitement? Large enterprises generate huge volumes of data, and there is an increasing demand for real-time endpoint security solutions. Those two factors are definitely part of the equation.
How, the opportunity that smaller businesses provide is set to grow at a higher rate in the medium term. That creates a lot of opportunity for those looking to invest in SentinelOne stock. According to business-to-business research firm MarketsandMarkets, there is currently high availability of cost-effective cloud solutions. This paves the way for strong growth in demand from small and medium businesses. Over the next five years, investors can expect these firms will demand endpoint security solutions.
This exponential growth in the number of endpoints is the key opportunity for SentinelOne.
Applying a Behavioral Approach
SentinelOne is looking to change up the endpoint security model. While some providers in this space focus on plugging the holes and vulnerabilities found in a network’s dynamic web of endpoints, SentinelOne has built behavioral models. These can detect, respond and protect in a single solution, which it calls Singularity.
The AI-enabled solution implies that it adapts to the uncertainties and challenges evident in each network that it is deployed to protect.
The model has attracted more than 3,500 customers, many of those large enterprise users. New bookings are more than doubling year-over-year, and so is revenue. But it is the largest deals, for more than $2 million, that are perhaps most impressive. This segment of sales has grown 150% over the previous year. Growth at a clip like that explains the valuation that investors have attached to the up-and-coming company.
Listening to the Crowd
I’m a strong believer in the wisdom of the crowd when it comes to technology. This is particularly true in a crowded field like endpoint protection software. The crowd that I turned to for this assignment is on IT Central Station, a leading review site for enterprise technology.
What I learned from the reviews there is that SentinelOne is one of the top-ranked companies in a trending area within cybersecurity.
So what makes SentinelOne so special? IT Central Station reviewers appreciate its AI capabilities (enabling detection of many different types of cyber intrusions), its intuitive user interface that makes it easy for IT managers to neutralize attacks, and its support for cloud.
According to the review platform, the most popular comparisons to SentinelOne are with CrowdStrike (NASDAQ:CRWD), Carbon Black, which was acquired by VMware (NYSE:VMW) for $2.1 billion, and Cylance, which was acquired by Blackberry (NYSE:BB) for $1.4 billion.
But are these reviews the real deal? CEO Russell Rothstein told me via email that all reviews of endpoint protection software — as well as other enterprise software — on IT Central Station are validated by a triple authentication process and backed by the company’s Zero Fake Reviews policy. He said that more than 3 million IT buyers have read and written reviews on the platform in the past year.
Big Tech Backers
There is an impressive roster of tech backers that have already made the decision to invest in SentinelOne stock. In February, the company raised $200 million in a Series E round at a $1.1 billion valuation. That followed a 2019 raise of $120 million.
In the February round, I’m most impressed with a move that Qualcomm Ventures, the investment arm of Qualcomm (NASDAQ:QCOM), made. Why? Because that venture group has been very selective and careful in the companies that it has backed. I’ve covered, in their early stages, a number of QV-backed companies that went on to impressive exits, including Ravello Systems and Magisto. Oracle acquired Ravello Systems in 2016, and Vimeo acquired Magisto in 2019.
According to Merav Weinryb, a Qualcomm Ventures managing director, the firm sees potential in SentinelOne to become a true cybersecurity market leader:
“SentinelOne stood out in many fronts, specifically in their execution — they are one of the fastest growing cybersecurity companies in the U.S. — with extremely high customer retention rate, new logo bookings growth and revenue growth,” she wrote in an email response to questions from InvestorPlace.
Weinryb also noted that QV views CEO and founder Tomer Weingarten as “a true leader, who has a deep understanding of the domain, and a great vision on the product and roadmap of the company.”
Joining Qualcomm Ventures in the round were Insight Partners, Third Point Ventures and Tiger Global Management. Plus, Weinryb is confident in the management team at SentinelOne. She wrote that the group is filled with very experienced executives who have strong domain expertise.
Should You Invest in SentinelOne Stock?
What is next for SentinelOne? Well, COO Nicholas Warner says the company is enjoying the backing and its unicorn valuation. He told Cyberscoop last month that an “IPO is definitely in the cards over the next few years.”
Those looking to invest in SentinelOne stock should check out secondary marketplaces EquityZen or SharesPost. Each marketplace provides platforms for accredited investors to invest in pre-IPO companies. SentinelOne is no exception.
Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups. He was previously emerging markets editor for Bloomberg News in Tel Aviv. He is a contributor to the Powered by Battery blog. Robert does not own any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
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2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
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