Spyware startup Paragon acquired for up to $900M by investment firm AE
Spyware startup Paragon acquired for up to $900M by investment firm AE
Paragon's flagship product, Graphite, is a software solution capable of penetrating all popular communication applications, including WhatsApp, Telegram, and Signal, which are widely considered secure and encrypted.
An impressive exit in offensive cyber: Paragon, a company that competes directly with NSO, has been sold to the American private investment firm AE Industrial Partners for $500 million. Depending on the achievement of growth and profitability milestones, the deal's total value could eventually reach $900 million.
Paragon was established in 2019 by a group of former members of Unit 8200 and is led by Ehud Schneerson, a former commander of the unit, who now serves as Paragon's executive chairman. Another prominent shareholder in the company is former Prime Minister and IDF Chief of Staff Ehud Barak. Additional major shareholders benefiting from the exit include VC firms Battery Ventures and Red Dot, which recently registered another, albeit less successful, exit with the sale of Perception Point to Fortinet for approximately $100 million.
Paragon employs 450 people, all based in Israel. Together with the founders, the employees hold half of the company's shares and are expected to be among the largest beneficiaries of the sale. Paragon's flagship product, Graphite, is a software solution capable of penetrating all popular communication applications, including WhatsApp, Telegram, and Signal, which are widely considered secure and encrypted. Despite having raised only $30 million to date, Paragon has achieved an exceptionally high return on investment, although part of the transaction involves shares in the merged company rather than cash.
The AE fund, which focuses on infrastructure and security investments, plans to merge Paragon with another portfolio company, Red Lattice, and later integrate it with additional companies to form a major player in the rapidly growing defense technology market. In the initial phase, Paragon's founders—Idan Nurik (CEO), Liad Avraham, and Igor Bogudlov—will remain in the merged company alongside Schneerson.
The sale of Paragon to an American company is a significant achievement—not only in terms of its valuation but also because of its sensitive field of activity. The negotiations were lengthy and required regulatory approvals from both U.S. authorities and Israel's Ministry of Defense. Initially, expectations were low, given the Biden administration's reluctance to engage in this type of business, especially following the blacklisting of Israeli competitors like NSO and Candiru by the U.S. Department of Commerce.
However, Paragon was included on the Biden administration's list of "good" companies—those that refrain from selling intelligence collection solutions to non-democratic regimes, at least by definition. This distinction played a critical role in securing the transaction and ensuring Paragon's entry into the U.S. market.
Earlier this year, U.S. Immigration and Customs Enforcement signed a $2 million one-year contract with Paragon.
