Netskope Raises $401M Via Convertible Notes

Cloud security unicorn Netskope has raised $401 million via convertible notes that gives the Santa Clara, Calif.-based company the financial room to further develop its SASE products and “channel-centric” go-to-market strategy.

The short-term debt financing was led by investment funds managed by Morgan Stanley Tactical Value, with participation from Goldman Sachs Asset Management, Ontario Teachers’ Pension Plan and CPP Investments.

A convertible note is an investment vehicle often used to delay establishing a new valuation for younger companies until a later round of funding or until some other financial milestone is hit, such as an IPO. 

Convertible notes are ultimately structured as loans with outstanding balances automatically converted to equity at predesignated points.

Netskope co-founder and CEO Sanjay Beri previously has expressed interest in pursuing an IPO one day. Netskope was last valued at $7.5 billion after raising $300 million in a Series H funding round in 2021.

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Netskope has raised a total of $1.4 billion since its founding in 2012.

In a press release, Netskope, which employs more than 2,500 people, said the company plans to use its new funding to “extend its technology and platform advantages.”

The company also said it planned an “expansion of strategic go-to-market activities” in a SASE field that some analysts have predicted could hit $36 billion by 2025.

In a statement to CRN, Netskope said it has a “channel-centric” go-to-market strategy and that “nearly 100 percent of [its] business is through [its] valued partner ecosystem.”

The company added that its current plan “absolutely includes partners and ongoing emphasis on our strategic channel relationships.”

Netskope also said it is “actively hiring, with open roles on all teams, across the world.”

In a press release, Beri signaled the new funding will allow the company to pursue its long-term mission.

“Our vision from day one was that traditional network and security perimeters would transform, with users, data and devices moving outside the confines of corporate network perimeters and requiring a new approach to security,“ said Beri. 

“With a cloud-first, data-first and customer-centric philosophy, we built a market-leading SASE platform and one of the world’s fastest and most-connected security cloud networks. We have enabled enterprises everywhere to allow their users to be mobile, efficient and flexible while securing them and the data and applications they access, whether they are in the cloud, on the web or are private applications on-prem and beyond.”

Pedro Teixeira, managing director of Morgan Stanley and co-head of Morgan Stanley‘s Tactical Value Investing Team, expressed optimism about Netskope’s future.

“Cloud migration—and securing this modern network—represents one of the most significant and transformative technology shifts in decades,” he said.

“We seek to invest in high-quality companies that are driving their markets today and into the future. Netskope epitomizes this, with its innovative SASE vision and solid execution, a robust platform with significant monetization ahead of it, a large global customer base, and defensible market leadership. We look forward to partnering with the team as they strive to realize the significant opportunity that lies ahead.”

Netskope made no mention in its press release whether it might use some of its funds to acquire other companies.

In July, Netskope acquired WootCloud, described as an innovator in applying zero trust principles to IoT security. A month later, Netskope disclosed it had acquired Infiot, along with its “borderless WAN” offering for securing a range of remote work sites.

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