Industrial group’s venture arm joins $12m fundraising by Xage
Xage, a cyber security start-up that uses blockchain technology to securely link industrial machines from oil wells to smart meters, is raising $12m from investors including GE Ventures, as the US government warns about gaps in the defences of the energy industry.
The company is one of a new generation of start-ups trying to cater to increased concerns about cyber attacks on industrial equipment connected to the internet. The Department of Homeland Security and FBI warned earlier this year that the Russian government has compromised networks in critical infrastructure, while the rise of ransomware enables cyber criminals to profit from interrupting industrial equipment.
Xage is unusual in using blockchain, the technology first used by cryptocurrencies, to create a distributed network of devices that can authenticate the digital fingerprint of each machine.
The start-up is valued at about $35m before the new funds raised, according to a person familiar with the matter.
Duncan Greatwood, Xage chief executive, who joined the company from Apple, said the need for distributed security was becoming “more urgent”. The energy industry wants to take advantage of technologies that give it remote access to far away oilfields or wind farms but needs to make them secure from hackers.
“Even two years ago most of these facilities were just disconnected from the outside world and the risk was kind of contained,” he said. Now, as they want to move data from devices to the cloud to analyse it, there is a “level of exposure that never existed before. If they get compromised in a particular place, it affects not just two or three drills but 20,000 of them.”
Xage uses blockchain so that anomalies on just one device will be detected by the distributed system, preventing a hacker from spreading through a centralised network.
Securing industrial control systems can be difficult because they were often made long before the latest threats, and overlaying security can be a struggle when machines come from different manufacturers. Other new companies are also working on the challenge, including Claroty, which recently raised $60m from investors including equipment manufacturers Rockwell, Siemens and Schneider-Electric.
Xage’s customers include NTT Communications, GE Renewables and GlobaLogix, which supplies oil and gas companies. As well as GE Ventures, the venture capital arm of the industrial group General Electric, its other investors include March Capital Partners, City Light Capital and Nexstar partners. Chuck Drobny, chief executive of GlobaLogix, a contractor to small and medium-sized oil and gas companies, said his customers were often paying $1,000 for employees to travel to a field to change passwords on devices because they were not connected remotely. Now, they will be able to detect problems from afar, which he compared with having sensors all around your house rather than a security guard outside your door.