Source: Cisco is paying ~$650M in cash for Isovalent, or 32 times the startup's ARR; Isovalent raised a $40M Series B at a ~$250M valuation in September 2022
Anissa Gardizy / The Information : X: @anissagardizy8 . LinkedIn: Timothy Snow X: Anissa Gardizy / @anissagardizy8 : scoop: Cisco plans to buy cloud networking startup Isovalent for ~$650mm in cash $CSCO is paying around 32x the startup's annual recurring revenue, suggesting that the enterprise software stock rebound is also boosting startup valuations https://www.theinformation.com/ ... LinkedIn: Timothy Snow : Cisco once again adding to it's portfolio with another acquisition, Isovalent - a leader in open source cloud native networking and security. …
Context & Ripple Effects
Isovalent entered the deal after a $40M Series B for its Cilium-based networking and security software in 2022. The reported price implies a substantial step-up from that round's roughly $250M valuation.
The transaction also extends Cisco's established pattern of buying cloud-management and software-defined networking capabilities, including its earlier Viptela acquisition.
First-order effects
- Cisco adds Isovalent's cloud-native networking and security technology, including its connection to the open-source Cilium and eBPF ecosystems, to its portfolio.
- Isovalent's investors and employees receive a cash exit at a reported ~$650M valuation; the reported 32x ARR multiple becomes a concrete valuation reference for comparable infrastructure-software startups.
Second-order effects
- The multiple may strengthen negotiating leverage for cloud-native networking and security vendors with recurring revenue, while raising the bar for buyers deciding whether to build, partner, or acquire.
- Cisco's ownership of a key commercial contributor to Cilium could make enterprise customers and ecosystem partners more attentive to the project's governance and product direction.
Third-order effects
- If large network vendors continue to acquire open-source cloud-native specialists, differentiated commercial support and enterprise distribution may become more concentrated inside incumbent platforms.
- The deal suggests that strategic buyers can still assign premium values to infrastructure software with durable recurring revenue, even as the sustainability of such multiples will depend on future growth and buyer demand.
The trend: Cloud-networking incumbents are using acquisitions to absorb open-source-native security and networking specialists as enterprise infrastructure shifts toward cloud-native software.