“I’ve spent decades in cybersecurity and seen firsthand how poor data quality undermines even the most advanced security initiatives,” said Balázs Scheidler, CEO of Axoflow, following the announcement of their seed round.
Axoflow, a Hungarian-founded, US-based cybersecurity startup, secured €6.7M ($7M) for its pioneering security data curation pipeline. EBRD Venture Capital is leading this round, while all existing major investors, Credo Ventures and e2vc, have significantly increased their stakes in the company, reaffirming their belief in Axoflow’s mission and the trajectory of its growth.
Their solution revolutionizes the way enterprises collect and handle security data, according to the company. It helps make high-quality security data more accessible for better detection, response, AI, and compliance. They can flaunt with words like revolutionizes, taking their founder’s experience. Both the CTO, Sándor Guba, and the VP of Engineering, Ferenc Hernádi, are seasoned infrastructure engineers. The CEO, Balázs Scheidler, is the creator of the industry-standard open-source project syslog-ng and the founder of Balabit, a security company that had a successful exit in 2018.
Following this substantial seed round, we dive further into their business, what they’ve been up to in recent months, and what they plan next.
Reaching first milestones
The last time we featured them on The Recursive, Axoflow secured the first $2.5 million seed round. Since then, in the summer of 2023, they’ve had their first paid customers and a wave of new interest. Their market space is also becoming more recognized.
The team is now almost 30 people big, spread across multiple time zones: the US, Hungary, and Spain. Their engineering and marketing teams grew the most in the past year.
The key milestone was also the introduction of AxoRouter which powers Axoflow Platform, a fully functioning security data pipeline unveiled at Splunk .conf24.
“The biggest improvement of the platform was the introduction of AxoRouter, our data curation engine. It’s a curation solution that collects, aggregates, transforms, and routes all kinds of security data automatically – at carrier-grade scale“, commented Balázs Scheidler for The Recursive.
The more data, the better. Maybe not…
Axoflow Platform eliminates the need for manual, code-heavy data wrangling by offering a pipeline that automatically handles data from a wide array of security sources, including Syslog, which can still account for over half of all security data.
Previously, enterprises collected all the security data possible as they thought that more data equaled more value. Unfortunately, this turned out to be not true, points Scheidler:
“… Splunk estimates that over 50% of the data is dark data that isn’t used or accessed ever. Also, SOC teams use SIEMs (Security information and event management) to store and analyze the collected data to detect and respond to security threats. SIEMs are usually priced based on the data volume loaded (ingested) into them. So not only is most security data not actionable but it’s also very expensive. Companies report 28% YoY data growth on the average.”
Scheidler explains that to solve the data quality and quantity problem, enterprise teams implemented manual solutions that required extensive manual coding and had to be set up and maintained by them. That’s where the Axoflow Platform kicks in.
“The platform automates the data curation process by automatically identifying the type of security data it is fed with and automatically applying reduction and transformation rules on it while keeping data integrity. The resulting data is reduced, leading to 50% or more cost savings. It’s also immediately actionable for the SOC teams, enabling them to detect, and respond to threats faster, use AI, and have better compliance.”
Focused on security cases
Initially, the platform was designed to optimize the entire machine data lifecycle, so it targeted both security and observability use cases (*observability is the ability to properly collect and manage business data, then make informed decisions using insights from that data). Eventually, they focused on security data used by SOCs (Security Operations Centers) to detect and respond to threats targeting their enterprise. Scheidler told us more about what influenced that switch.
“These two areas are converging in the longer term, but right now these are two separate markets, using separate tools and stakeholders with similar problems.
Based on numerous conversations with prospective customers, VCs, and other professionals, we came to understand that our unique competitive edge is in security data, and that’s where we started to focus. It meant developing and marketing our product as a security data curation pipeline to help enterprises access high-quality security data at reduced cost without coding.
Now, the solution is aimed at highly regulated enterprises. The key verticals are government, healthcare, telco, energy, and finance. They are already working with multiple customers, most notably a large US government organization and a global telecommunications company. “We are also running several POC deployments, for example, at a nationwide healthcare service provider in the US and at a global industrial concern,” said Scheidler.
Their main market is currently the US, so their data regulation compliance efforts are focused there. They’ve implemented the rigorous ISO 27001 standard and are in the process of acquiring SOC 2 certification.
Fresh (and old) funds, market, and upcoming events
Before this second seed round, in July 2023, Axoflow secured a $2.5 million seed round led by Credo Ventures, 500 Emerging Europe, Notion Capital, and several CEE angel investors, including Jared Schrieber – a US expat living in Hungary who has supported many successful ventures in the country, including Munch, Bindr, and Shrooly.
It’s first investment was a $400,000 from angels, including former Balabit co-founder László Szakál, the Managing Director at Startup Hungary Csongor Bias, and American angel Travis McPeak through a large Western European fund that has requested anonymity.
Many of them helped Axoflow not just with money, as Scheidler pointed out: “Their trust and open-mindedness helped us find the right problem and the right market where we could win during our first stage since the pre-seed funding. Also, they helped in securing this round of funding, with introductions, feedback, and support in the creation of the pitch deck and with back-channel communication.”
With the new funding, Axoflow will further accelerate product development and strengthen its market presence. For this year, they have many things planned, so they also expect to be recognized by more and more analyst firms, Scheidler concludes.
“This year will already be very busy for us, and being busy is good. With the fresh funds we aim to develop our product further as well as to increase our market presence in the US. One step to achieve this will be for us to participate in two major industry events: RSA Conference in April and Gartner Security and Risk Summit in June.”
