IronNet struggled to scale its business.

Edward Gately, Senior News Editor

October 3, 2023

4 Min Read
IronNet shuts down
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Liquidity issues have forced IronNet to shut down and terminate all of its remaining employees.

This comes after the company early last month furloughed nearly all of its remaining employees and substantially curtailed business operations due to accelerating liquidity issues. We couldn’t reach IronNet to find out how this will impact its partners.

Founded in 2014, IronNet merged cybersecurity products with service to deliver advanced real-time defense across global, private and public sectors.

“On Sept. 29, given the unavailability of additional sources of liquidity and after considering strategic alternatives, IronNet … ceased all activities of the company and its subsidiaries, and terminated the remaining employees of the company and its subsidiaries,” it said in its latest U.S. Securities and Exchange Commission (SEC) filing. “As a result, all of the material business activities and operations of the company ceased, the company does not have the ability to satisfy its debts and related obligations, the company will no longer have the capability to prepare financial statements and other disclosures required for periodic reports for filing with the SEC, and the related actual and potential effects on the company and its subsidiaries will be material and adverse.”

Liquidity Issues Lead to Pending Chapter 7 Bankruptcy

IronNet‘s board of directors authorized the company to file for bankruptcy as soon as possible. It doesn’t anticipate being able to pursue bankruptcy protection under chapter 11, but instead will file under chapter 7.

“If the company makes the bankruptcy filing under chapter 7 … a chapter 7 trustee would be appointed or elected to liquidate the company’s assets for distribution in accordance with the priorities established by the bankruptcy code,” it said. “The company expects that liquidation under chapter 7 would result in significantly smaller distributions being made to stakeholders than those it might obtain under chapter 11 primarily because of the company’s assets would have to be sold or otherwise disposed of by a chapter 7 trustee in a distressed fashion over a short period of time rather than sold by existing management as a going concern business. The company expects that no distributions would be available for stockholders in a chapter 7 liquidation.”

Last month’s furlough and related cessation of business operations constituted events of default under the terms of the company’s borrowing.

Ongoing Struggles

Eric Parizo, managing principal analyst at Omdia, which shares a parent company with Channel Futures (Informa), said IronNet was attempting to advance a “fascinating concept” that it called collective defense.

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Omdia’s Eric Parizo

“By automating real-time behavior-based threat detection, anonymizing the results and sharing them among a critical mass of enterprise customers, its IronDome solution was intended to help identify advanced threats with greater velocity,” he said. “It also offered an network detection and response (NDR) solution that fed data into IronDome.”

Unfortunately, IronNet struggled to scale its business, Parizo said.

“The solution was extremely sophisticated, and many organizations lacked the security maturity to make the most of it,” he said. “Also, its ability to offer a broad set of detections was based on a critical mass of customers providing data back to IronDome, but it could never penetrate enough verticals to fully build out its industry-specific knowledge sets. Plus, with the exception of network-based threats, IronNet didn’t provide detailed remediation capabilities, effectively making it a special-purpose threat intelligence tool. In the end, enterprises perceived it as a ‘nice to have’ and not a ‘must have,’ and IronNet couldn’t overcome that challenge.”

Last fall, IronNet cut nearly 90 employees, or 35%, of its workforce, and co-CEO William Welch and CFO James Gerber left the company.

C5 Capital and its partners provided IronNet’s board with a term sheet to fund the company’s restructuring. In addition, C5 Capital gave IronNet $300,000 on Aug. 29. It also provided a $1 million note for further bridge financing of the company. C5 Capital and its partners are the sole funders of IronNet since January. In all, C5 Capital has provided nearly $15.2 million in financing to IronNet.

Want to contact the author directly about this story? Have ideas for a follow-up article? Email Edward Gately or connect with him on LinkedIn.

About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

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