Cybersecurity Startup Cylake Completes $245 Million New Funding Round
Cybersecurity startup Cylake announced the completion of a $245 million new funding round, led by Lightspeed Venture Partners, with participation from Picture Capital and Redpoint Ventures. This round was completed in the form of convertible notes, bringing the company's total funding to $290 million to date.
Cylake was founded in March 2026 by Nir Zuk, the founder and former CTO of Palo Alto Networks, who also secured $45 million in seed funding led by Greylock Partners at that time. Co-founders include Wilson Xu, a former engineering executive at Palo Alto Networks, and Udi Shamir, co-founder of SentinelOne and a former distinguished engineer at Palo Alto Networks. All three have had significant entrepreneurial or professional experiences in the cybersecurity industry.
Cylake positions itself as an "AI-native, fully data sovereign" cybersecurity platform, with products fully deployed in clients' local or private cloud environments, targeting highly regulated industries and government agencies that cannot rely on public clouds. The goal is to integrate the products of dozens of outdated security vendors currently used in a fragmented manner by banks and critical infrastructure operators into a unified data foundation and AI-driven workflows. The company currently has over 40 employees, with a public beta program set to launch by the end of 2026 and a formal commercial version expected to be online in 2027.
As part of this funding round, Ravi Mhatre, co-founder and partner at Lightspeed, joined the board of directors of Cylake, while Rakesh Loonkar, a partner at Picture Capital, entered the board as an observer. Lightspeed stated that most markets underestimate the speed at which AI and SaaS are reshaping enterprise cybersecurity defenses.
Nir Zuk founded Palo Alto Networks in 2005 and served as the company's CTO for a long time, leading the next-generation firewall product, which was described by Nikesh Arora, the current chairman and CEO of Palo Alto Networks, as "revolutionizing the security industry landscape with next-generation firewalls." Zuk has since retired from Palo Alto Networks, with the CTO position taken over by Chief Product Officer Lee Klarich. According to public financial reports, Palo Alto Networks had a revenue of $9.2 billion for the fiscal year 2025, a 15% year-on-year increase, with revenue expectations for fiscal year 2026 ranging from $10.48 billion to $10.53 billion.
The logic driving this funding is the combination of the "second entrepreneurship" effect of top security founders and the capital chase in the AI-native security sector: mainstream venture capital firms like Lightspeed and Redpoint increased their investment in Cylake with a substantial convertible note just six months after the seed round, betting on the historical success of Nir Zuk's team and their product judgment rather than on product data that has yet to be commercially released. The funding is clearly flowing from venture capitalists to the founding team and product development, and the choice of convertible notes instead of directly priced equity indicates that investors are willing to allow the company to retain valuation flexibility before the official product and customer data are released; the beneficiaries are the founding team and existing shareholders (with seed round investor Greylock seeing an increase in unrealized gains), while the pressure falls on traditional security vendors that still rely on legacy architectures and have not yet launched AI-native solutions.
Cylake's two rounds of funding total $290 million, making it one of the few cases among cybersecurity startups to receive hundreds of millions in follow-up investment shortly after the seed round.
Source: Public Information
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Nir Zuk founded Palo Alto Networks in 2005, integrating previously fragmented security products like firewalls and intrusion detection into a single platform called "next-generation firewall." This product logic later defined the entire product landscape of the cybersecurity industry, and the company grew from a startup to an industry leader with a revenue of $9.2 billion in fiscal year 2025. Co-founder Udi Shamir previously co-founded SentinelOne, another well-known endpoint security company that also emerged from a disruption of traditional antivirus models.
In this funding round, Lightspeed, Picture Capital, and Redpoint chose to invest $245 million in convertible notes just six months after Cylake's seed round, at a stage when the product had not yet been publicly released. The funding did not flow to verified revenues or customer contracts but directly bet on the historical success rate of the founding team and the niche positioning of "data sovereignty." This "people are worth more than products" approach essentially represents venture capital racing ahead in the AI-native security sector, using real money to secure a team that could potentially replicate Palo Alto Networks' success path.
This is similar to how SentinelOne achieved high valuation financing early on based on the founding team's background, and it echoes the pattern in the cybersecurity industry where each generational technological shift sees founders of the previous generation leaving to create new platforms—just as Palo Alto Networks integrated firewalls and intrusion detection, Cylake aims to address the localized security needs still scattered among dozens of outdated vendors in highly regulated industries like banking and critical infrastructure. Currently, Cylake is still in the product validation and team building phase and has not yet entered a period of large-scale commercialization.
This funding essentially serves as a capital prelude to the logic of technological replacement: public cloud-native security architectures encounter structural bottlenecks in highly regulated scenarios where data cannot leave the domain. Cylake redefines the product standards in this market segment with "AI-native + fully localized" solutions. The mechanism behind this is that AI capabilities originally relied heavily on cloud computing power and centralized data, but regulatory and sovereignty data requirements force security capabilities to be localized. Whoever can first integrate AI capabilities into a localized architecture has the opportunity to capture a market segment that has been temporarily overlooked by cloud security vendors.
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