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The Associated Press has released a large article about the history of the collapse of IronNet, an information security startup founded by the former head of the NSA and the US Cyber Command, Keith Alexander.
The article is best summarized by the words of the cyber general himself, that part of the problems is due to his naïve ideas about how the business world works.
The company was selling the idea of a "private version of the NSA": with the help of its product and analysts, IronNet was going to scan its customers' networks and find threats that were difficult to detect alone. This approach was called the Collective Defense Platform. However, as AP's interlocutors note, it was not unique, and the main advantage of the company was the aura of Keith Alexander and other former officials with a background in the field of national security. In addition, although IronNet hired good specialists, it did not deal with the product enough, and it did not show any particular effectiveness.
But the main problems lay not in the product plane, but in terms of how the company built its business. Here, the authors of the article quote the words of former IronNet vice president Mark Burley, who says that he is ashamed of working at this company, and the culture created there was "the same as at Theranos" (a startup that promised a revolution in blood testing, which, in fact, turned out to be a scam).
In 2021, the company went public, and its share price rose due to high projected earnings. However, this required new contracts, and it was not so easy to get them in a competitive market. The article quotes an anonymous participant in a meeting at which IronNet tried to secure a contract with the NSA, but the company was allegedly not taken seriously. As a result, by the end of 2021, it was forced to lower its forecasts for its turnover income by more than half, by 60%.
Much attention in the article is paid to the role of one of the major partners of IronNet, the investment firm C5 Capital, founded by André Pinaar from South Africa. Pinaar had extensive experience of cooperation with rich people, former officials from different countries. Through Pinaar, the author of the article also finds a Russian trace in the story of IronNet. Pinaar allegedly had business ties to Viktor Vekselberg, which means that receiving money from a South African investment fund could somehow compromise IronNet. In any case, the former American security forces should have been wary. In fact, nothing else is stated in the article, and it seems to me that the story with Russia is far-fetched.
What Pinaar's investment firm was definitely involved in was the inflating of IronNet's revenues. In order not to make the forecasts look too bad, C5 Capital acted not only as an investor, but also as a client of IronNet, concluding two one-year contracts for $5.2 million. However, if for a large company such a contract amount would look reasonable, then a small investment fund clearly did not spend so much money on information security. According to one internal document, IronNet's services were actually valued at $50,000 a year.
Already in the spring of 2022, investors filed a class action lawsuit against IronNet for fraud with projected revenues. The company denied malicious intent, but in the end still paid $6.6 million in the lawsuit.
In September 2023, the company announced bankruptcy proceedings. Shortly thereafter, entities associated with Pinaar provided her with loans in the amount of 10 million for restructuring. In February of this year, IronNet restarted in a reduced form and without Keith Alexander. Pinaar's lawyers continue to defend the company's reputation with zeal: "Any claim that IronNet was not successful is absolutely false." According to the investor, the company continues to protect customers in the United States and Europe. And recently, IronNet has been trying to build cooperation, including with the Ukrainian government.
Source
The article is best summarized by the words of the cyber general himself, that part of the problems is due to his naïve ideas about how the business world works.
The company was selling the idea of a "private version of the NSA": with the help of its product and analysts, IronNet was going to scan its customers' networks and find threats that were difficult to detect alone. This approach was called the Collective Defense Platform. However, as AP's interlocutors note, it was not unique, and the main advantage of the company was the aura of Keith Alexander and other former officials with a background in the field of national security. In addition, although IronNet hired good specialists, it did not deal with the product enough, and it did not show any particular effectiveness.
But the main problems lay not in the product plane, but in terms of how the company built its business. Here, the authors of the article quote the words of former IronNet vice president Mark Burley, who says that he is ashamed of working at this company, and the culture created there was "the same as at Theranos" (a startup that promised a revolution in blood testing, which, in fact, turned out to be a scam).
In 2021, the company went public, and its share price rose due to high projected earnings. However, this required new contracts, and it was not so easy to get them in a competitive market. The article quotes an anonymous participant in a meeting at which IronNet tried to secure a contract with the NSA, but the company was allegedly not taken seriously. As a result, by the end of 2021, it was forced to lower its forecasts for its turnover income by more than half, by 60%.
Much attention in the article is paid to the role of one of the major partners of IronNet, the investment firm C5 Capital, founded by André Pinaar from South Africa. Pinaar had extensive experience of cooperation with rich people, former officials from different countries. Through Pinaar, the author of the article also finds a Russian trace in the story of IronNet. Pinaar allegedly had business ties to Viktor Vekselberg, which means that receiving money from a South African investment fund could somehow compromise IronNet. In any case, the former American security forces should have been wary. In fact, nothing else is stated in the article, and it seems to me that the story with Russia is far-fetched.
What Pinaar's investment firm was definitely involved in was the inflating of IronNet's revenues. In order not to make the forecasts look too bad, C5 Capital acted not only as an investor, but also as a client of IronNet, concluding two one-year contracts for $5.2 million. However, if for a large company such a contract amount would look reasonable, then a small investment fund clearly did not spend so much money on information security. According to one internal document, IronNet's services were actually valued at $50,000 a year.
Already in the spring of 2022, investors filed a class action lawsuit against IronNet for fraud with projected revenues. The company denied malicious intent, but in the end still paid $6.6 million in the lawsuit.
In September 2023, the company announced bankruptcy proceedings. Shortly thereafter, entities associated with Pinaar provided her with loans in the amount of 10 million for restructuring. In February of this year, IronNet restarted in a reduced form and without Keith Alexander. Pinaar's lawyers continue to defend the company's reputation with zeal: "Any claim that IronNet was not successful is absolutely false." According to the investor, the company continues to protect customers in the United States and Europe. And recently, IronNet has been trying to build cooperation, including with the Ukrainian government.
Source
