Could it get any more Baltimore than this?
It was a beautiful day in Charm City when James C. Foster took a Midwestern investor to Nick's Fish House, overlooking the Patapsco River.
Foster had an idea for his company, ZeroFox, one of the biggest cybersecurity firms in the area. He wanted ZeroFox to acquire another cybersecurity firm in Oregon and go public — at the same time.
Foster said he had never seen a cybersecurity deal like this before, especially in Baltimore, but it made sense to Adam Gerchen. Gerchen was visiting from Chicago, where he led a special-purpose acquisition company, or SPAC, called L&F Acquisition Corp. A SPAC is a company created solely to raise money, buy a company and take it public.
"Compared to the rest of the SPAC market, we have a very specific and narrow mandate," Gerchen said, and ZeroFox fit the bill perfectly.
But before Gerchen and Foster could sign off on the deal, they needed to know whether it would work culturally.
For that, Foster would need to present Gerchen with something special: "A gigantic pretzel, smothered in crab dip, smothered in cheese."
"We're in Federal Hill," Foster said. "I took him to Nick's Fish House. This [deal] was not done at a steakhouse...I got him to experience his first crab pretzel."
"From that moment on, I knew ZeroFox was the only company to partner with," Gerchen said.
On Monday, the deal was announced.
Pending regulatory approval and the support of L&F investors, ZeroFox will soon become a publicly traded company with an expected equity value of $1.4 billion. Foster called it "one of the largest debuts for a public company in Baltimore history."
"This was the next milestone for us. This is not an exit. This is not the end," Foster said of ZeroFox, which was founded in 2013. "We went looking for a route to get to market and to get public...We went looking for the perfect SPAC."
The deal is expected to close over the next six months or so.
As part of the deal, ZeroFox will become ZeroFox Holdings and will also acquire IDX, a cybersecurity company based in Portland, Oregon. Foster said the two companies have been working together for about three years.
"We decided it was time to put the organizations together and join forces," Foster said.
The deal also raised $170 million in funding commitments, which will help ZeroFox invest in research and development and also look for new companies to acquire.
"We will have a lot of dry powder on our balance sheet," Foster said.
L&F is much more than just the financier, Foster said. Gerchen will be on ZeroFox's board of directors, and L&F had investors similar to the ones ZeroFox has.
"I didn't need a new anchor that came with money," Foster said. "I needed a new partner that knew what they were doing."
Foster said the deal with L&F and IDX will create a company with more than 650 employees, more than 1,700 customers, and more than $150 million in revenue this year. ZeroFox has offices in Phoenix, Chile, London, Israel and India, in addition to its headquarters in a renovated Pabst Blue Ribbon brewing building that dates to the late 1800s in southwest Baltimore.
"We'll continue to embrace this region for sure," Foster said. "But this won't stop us from pursuing our global expansion plans."
What sets ZeroFox apart from other cybersecurity companies is its focus on external security, Foster said. Internal security is the "old-school anti-virus" software on servers, computers, or even the cloud. Firewalls separate what comes in and out of a computer or network. External security focuses on everything beyond that firewall, which Foster said includes social media accounts, websites and domains, source code, information that's been leaked on the dark web and more.
Monday’s announcement is just the latest expansion for ZeroFox, which has grown rapidly in recent years.
ZeroFox announced in July that it had acquired Phoenix-based Vigilante, a company that specializes in identifying and monitoring cybercriminal activity on the dark web. Last year, ZeroFox acquired Cyveillance, a Virginia-based business unite of LookingGlass Cyber Solutions Inc.
Gerchen and Foster laugh about the crab pretzel at Nick's Fish House now, but looking back it was a crucial part of the deal.
"I think this is an important part. I was looking for a partner," Foster said. "This was a cultural fit."
