From Seed to Category Leadership: Congratulations to Medigate on $400 Million Acquisition!

Today, I’m pleased to share that YL Ventures portfolio company Medigate is set to be acquired by Softbank‘s Claroty for $400 million! This is a well-earned achievement for the legendary Medigate team and its founders, Jonathan Langer (CEO), Itay Kirshenbaum (VP R&D) and Pini Pinhasov (VP Product). As seed and follow-on investors, and Medigate’s largest shareholders who have supported Medigate from first to last dollar, this news is hardly a surprise. Medigate’s journey, which initially focused on medical device security before expanding into medical asset management, is a masterclass on how to reach category leadership in record speed.

To fully appreciate Medigate’s achievements, it’s worth travelling back to our first meeting in 2017, a critical year for healthcare cybersecurity. Having identified the medical sector as a priority attack vector and area of risk, we were keen on investing in a solution uniquely dedicated to healthcare network safety. However, we were also concerned about the rough journey our future portfolio company could expect in dealing with such a highly regulated and complex sector that often requires bespoke systems. Whoever would be up for the challenge would have to demonstrate a very special set of qualities. This is where Medigate gained its first advantage.

The keys to Medigate’s success

The strength of Medigate’s founding team can’t be understated; Jonathan, Itay and Pini’s synergy made an immediate first impression on all of us. Each highly accomplished in their own right, the combined potential of their complimentary leadership, skillsets and decision-making styles streamlined the company’s progress and strategic wins. Their sharp intuition and dedication to deep learning also drove three other major areas of Medigate’s success: its singular focus on the healthcare industry, technological superiority and capacity to delight customers.

Medigate is predicated on a sincere push to understand how healthcare networks work and interact, as well as their unique threat landscape and operational requirements. Unlike other IoT security solutions spanning multiple verticals, Medigate has remained steadfast in its dedication to healthcare and healthcare delivery organizations. This laser focus, coupled with Medigate’s focus on each customer’s unique set of technological and operational requirements, has been a real differentiator. Appreciating these nuances—and addressing them with white glove treatment—has also been instrumental in Medigate’s rapid growth to becoming a market leader.

How Medigate did it

Medigate actualized its strategy by recruiting top talent, especially in the form of researchers and engineers. The company’s R&D team quickly earned a reputation for itself by surmounting every unique technological challenge and customer request at unmatched speed. However, Medigate also understood the importance of paying equal attention to its go-to-market (G2M). Much of this success is owed to Executive Vice President of Sales, Tyson Hempel, who we had the pleasure of introducing to Medigate following his success at our former portfolio company, Hexadite (acquired by Microsoft). Under his direction, Medigate became the fastest portfolio company to win a multimillion dollar revenue deal. In fact, Tyson became the archetype we look for when helping our portfolio companies recruit G2M talent. Medigate’s success only accelerated with the addition of VP of Systems Engineering Stephan Goldberg. It’s also important to highlight the incredible work of VP Marketing Beth Ellis, who has been instrumental in ringing in Medigate’s accolades. Through her efforts, Medigate has become a regular fixture in KLAS’ annual Software & Services report—earning the title of Best in KLAS for Healthcare IoT Security in 2021.

Medigate moreover understood how to really hear and understand their customers. During the initial Covid-19 outbreak, many healthcare organizations found themselves diverting whatever funds they could towards acquiring life-saving machines and equipment. In some cases, this included their cybersecurity budgets, despite mounting attacks on their systems. Medigate offered its solution free of charge. This incredible move took place just as Medigate demonstrated another feat of active listening: appreciating how—and who—else they could offer value by providing meaningful visibility across a healthcare organization’s entire network. This led the company to expand into medical asset management, which now enables healthcare providers to maximize existing equipment, including their operation, where they are, and utilization levels. Promoting such efficiency has further assisted hospitals to focus their budgets where most urgently required.

Medigate further actualized their sector expertise and focus through strategic and meaningful partnerships to accelerate their success. We worked closely with Medigate to connect and secure partnerships with several key players from the ecosystem, such as Forescout, Cisco and Crowdstrike. This was instrumental in their mission to build a comprehensive solution that integrates well with other products.

A league of their own

What Medigate has managed to achieve in such a complicated and slow-moving sector, in such a short amount of time, is incredible. Their technology, approach and proven risk mitigation are exceptional, even by the standards of the skyrocketing cybersecurity industry. Our investment team worked hard to help source and secure customer leads only to see it land deals in months that would have taken other companies years. Our marketing team has also found themselves working tirelessly to promote the ceaseless stream of announcements and awards. We truly feel privileged to have worked closely with these visionaries across this journey of blowing through every benchmark and milestone from launch to acquisition.

Nonetheless, even we couldn’t anticipate just how quickly Medigate would manage to secure deals and grow their ARR. Despite our concerns over the inherent difficulties of the market, Medigate glided through them with ease, grace and distinguished expertise. The company consistently exceeded their targets every quarter. Q3 alone saw a 177% increase in YOY ARR growth! Their customers and deployments are among the highest we’ve seen, with successful recent expansions into Australia and Europe. Medigate has also developed a highly impressive (and growing) roster of marquee customers. Incredibly, the company managed to achieve all of this with zero churn: Medigate is the only company we have ever been involved with that has never lost a single customer, and that’s over a 4+ year stretch!

In truth, we believe that Medigate still has a great deal of potential left. Nonetheless, we have no doubt that the combination of Medigate and Softbank/Claroty will form a massive force for good in the IoT and OT domain. This is moreover an inspiring testament to the strength of Israel’s cybersecurity ecosystem. We offer our heartiest and sincere congratulations to the entire Medigate team. You’ve worked so hard and deserve this success. Well done!