Dragos Nets $110M in Series C Led by Major Global Energy, Manufacturing, Oil & Gas Company Investors

In yet another sign of the increasing maturity of the industrial control systems (ICS) and operational technology (OT) security sector, investors representing some of the world's largest energy and manufacturing companies have poured $110 million in Series C funding into ICS/OT security firm Dragos.

The investment arms of National Grid plc (National Grid Partners) and Koch Industries (Koch Disruptive Services) led the funding, with Saudi Aramco Energy Ventures (SAEV), Aramco Ventures' investment fund, and Hewlett Packard Enterprise. Previous Dragos investors Allegis Cyber, Canaan, DataTribe, Energy Impact Partners, and Schweitzer Engineering Labs, also joined the C round.

Dragos' funding, which to date totals $158 million, follows similar investment deals by energy-sector players: Dubai-based Forward Investments, a VC and M&A arm of Dubai Electricity and Water Authority, recently funded OT and Internet of Things security vendor Nozomi Networks for an undisclosed amount that raised Nozomi's investments to $54 million. ICS/OT vendor Claroty, whose funding now totals some $100 million, has been riding high with high-profile IT security industry partnerships on the heels of its $60 million Series B round two years ago led by investor arms backed by Rockwell Automation, Schneider Electric, and Siemens.

"The overall investment [in ICS/OT security] is recognizing that it's not just the big guys who are targets. ... Security is no longer a luxury, it's an investment" for industrial organizations, says Tanner Johnson, senior analyst with Omdia.

The reality that security also plays hand in hand with the business has been punctuated by real-world risks such as ransomware attacks. "You are dealing with facilities where the disruption of service is financially crippling," he says, as well as life-threatening in some cases. "Every hour [of disruption] could be $2 million in losses."

Robert M. Lee, co-founder and CEO of Dragos, says the latest investment round doesn't change his company's strategy, but it does open the door for more global expansion: The company now will open locations in Australia, Dubai, and the UK, as well as expand its research and development. Dragos also is rolling out a customer success team, he says, that will help asset owners and other Dragos users operationalize their ICS/OT security infrastructures.

"There's a big market validation piece to this" for ICS/OT security, Lee says of Dragos' Series C funding by energy and manufacturing sector giants such as Aramco, HPE, and Koch.

Lee says another issue driving industrial organizations to up their security game is digital transformation, some of which has been accelerated by the pandemic. "You're having private conversations in the boardroom about digital transformation and you don't have the secure foundation to make that journey," he explains.

To date, most of Dragos' business is selling its software platform for ICS/OT security incident detection and response but Lee says he's seeing an increase in demand for its cloud-based security service as well.

"Four years ago, VCs chased us — not to invest, but to get data on ICS," he says of the 6-year-old company.