Publicly traded content delivery provider Fastly Inc. today said that it has signed a $775 million deal to acquire Signal Sciences Inc., which makes security software for protecting web services from hackers.

The acquisition is a cash-and-stock transaction. Fastly will pay about $575 million in shares and $200 million in cash, as well as set aside a $50 million “retention pool” of restricted stock for Signal Sciences employees.

San Francisco-based Fastly provides a content delivery network or CDN that helps websites and cloud services load faster. In recent quarters, the company has branched out to new market segments such as serverless computing as part of an effort to open new revenue streams. The Signal Sciences deal could give that strategy a big boost by buying Fastly a larger presence in the lucrative and rapidly growing enterprise cybersecurity market. 

Signal Sciences sells cloud-based services that developers can integrate into their web applications to block common threats. The company’s technology provides protection against SQL injections, bots, attempts to hijack user accounts and other attacks. One of Signal Sciences’ hallmark features is that its services are relatively easy to use, which is a major boon for enterprises because complexity is often a barrier in cybersecurity initiatives.

No less important as far as Fastly is concerned, Signal Sciences has been seeing strong customer uptake. The cybersecurity provider bills itself as one of the “fastest-growing web application security companies in the world.” In a blog post today, Fastly Chief Executive Officer Joshua Bixby elaborated on that claim, detailing that Signal Sciences has seen “over 85% gross margin growth” and had annual recurring revenue of $28 million as of June.

Fastly is aiming to complete the deal by year’s end. Once the transaction wraps up, the company will incorporate Signal Sciences’ technology into an upcoming cybersecurity offering called Secure@Edge. Fastly’s Bixby wrote that Secure@Edge will integrate with its serverless computing offering, which is another component of Fastly’s efforts to expand its revenue base beyond content delivery.

Besides Signal Sciences’ technology, the deal will also buy Fastly a new set of customer accounts. That may open upselling opportunities by enabling it to promote its CDN and other products more directly to enterprises using Signal Sciences services. The security provider’s customers include DoorDash Inc., Starbucks Corp. and  other major brands.

Fastly’s top rival, Cloudflare Inc., is also expanding its security portfolio. The company earlier this year acquired a startup called S2 Systems Corp. that had developed a tool for protecting enterprise workers from web-borne threats. 

Photo: Fastly