Akamai buys security startup and former unicorn for $450M

Cambridge-based Akamai Technologies Inc. inked a $450 million deal to buy a security company that in 2021 had a unicorn valuation of at least $1 billion.

The top cybersecurity firm in Massachusetts (Nasdaq: AKAM), which has about 1,600 local employees, said Tuesday that its deal to buy privately held Noname Security is slated to close by the end of June.

San Jose, Calif.-based Noname Security billed itself as the first "API security" unicorn after its valuation soared in the wake of a $135 million round three years ago. In 2021, the company had $220 million in total financing.

A spokesperson from Akamai declined to disclose details beyond the purchase price, nor why the price was less than half the company's 2021 valuation. Noname Security's investors Georgian and Lightspeed did not immediately respond to a request for comment on their portfolio company's sale price.

However, many tech startups that saw their valuations soar in 2020 and 2021 have seen a sharp decline in value amid a market downturn in mid-2022. For the past two years, so-called "down rounds" and layoffs have become more common.

The deal is on the smaller side compared to Akamai's recent major acquisitions, which include cloud computing platform Linode LLC for approximately $900 million in cash in 2022 and "micro-segmentation" security startup Guardicore for about $600 million in 2021.

Noname Security specializes in API security, or protecting "Application Programming Interface." Such software works a bridge between two sources, allowing them to exchange data. A classic example is a weather app, which retrieves real-time data on temperatures and forecasts from a variety of sources, depending on location, through a set of APIs.

APIs can be leveraged by cyber criminals as access doors to consumers' data, and are frequently at the root of data breaches. One technique cyber attackers use is introducing "shadow APIs" to copy the data that's being exchanged.

Akamai plans to integrate Noname in its Application and API platform, and expects the more than 200 employees at Noname to join its security technology group. The acquisition is expected to deliver approximately $20 million of revenue for fiscal 2024.

Last year, Akamai reported $3.81 billion in total revenue, up 5.4% from the year before, with a profit of $547.6 million. Revenue from Akamai's security segment came at $1.76 billion, or 46% of total sales.

"Akamai has seen a growing need for API protection with our own data showing 109% year over year growth in API attacks," said Mani Sundaram, executive vice president and general manager of Akamai's security technology group. "With the addition of Noname, Akamai believes it will have the breadth of integrations and deployment choices needed to deliver comprehensive API protection for customers across all environments."