Summary:
Paragon acquired for $500 million, potentially reaching $900 million.
Founded in 2019 by ex-Unit 8200 members, led by Ehud Schneerson.
Graphite, Paragon's flagship product, can penetrate secure apps like WhatsApp and Signal.
The acquisition involves shares in the merged company rather than just cash.
The deal required regulatory approvals from U.S. and Israeli authorities.
Major Acquisition in Cybersecurity
Paragon, a formidable player in the offensive cybersecurity space, has been acquired by AE Industrial Partners for a staggering $500 million, with potential growth milestones that could raise the total value to $900 million.
Founded in 2019 by ex-members of Unit 8200, Paragon is led by Ehud Schneerson, a former commander of the unit. Among its notable shareholders is Ehud Barak, former Prime Minister and IDF Chief of Staff. This acquisition marks a significant exit for venture capital firms Battery Ventures and Red Dot, who have seen mixed success in previous exits.
Paragon's Workforce and Product
The company employs 450 people in Israel, with employees and founders holding 50% of the equity, making them key beneficiaries of the sale. Paragon's flagship product, Graphite, is capable of infiltrating secure communication platforms such as WhatsApp, Telegram, and Signal.
Despite raising only $30 million to date, Paragon has achieved a remarkable return on investment. However, the acquisition deal includes shares in the merged entity rather than solely cash.
Future Plans with AE Industrial Partners
AE Industrial Partners, focusing on infrastructure and security investments, plans to merge Paragon with its portfolio company Red Lattice and further integrate it with other companies to create a significant force in defense technology. The founders, Idan Nurik (CEO), Liad Avraham, and Igor Bogudlov, will remain with the merged company alongside Schneerson.
Regulatory Challenges and Market Entry
The acquisition is a notable milestone, especially given the sensitive nature of Paragon's operations. The lengthy negotiations required regulatory approvals from both U.S. authorities and Israel's Ministry of Defense. Initially, expectations were low due to the Biden administration's cautious stance toward such enterprises, especially after blacklisting Israeli competitors like NSO and Candiru.
However, Paragon was recognized by the Biden administration as a "good" company, which significantly aided the transaction process. Earlier this year, U.S. Immigration and Customs Enforcement also entered into a $2 million contract with Paragon, further solidifying its position in the U.S. market.
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