When a $400M Exit Missed Most Employees: The Inside Story of Koi’s Sale to Palo Alto Networks
In the whirlwind world of tech startup exits, every employee dreams of cashing in on stock options when their company is acquired. But for the team at Koi Security, that dream almost slipped through their fingers — even as the cybersecurity startup was being absorbed in a reported US $400 million acquisition by Palo Alto Networks.(ctech)
The acquisition made headlines across tech and business media as yet another strategic move by Palo Alto Networks to solidify its position in the rapidly evolving AI and cybersecurity market. But behind the headline figure lies a more complicated story about timing, equity, and the realities of startup growth.(ctech)
📈 A Rapid Rise – and a Surprise for Many Employees
Founded in mid-2024 in Tel Aviv by cybersecurity veterans Amit Assaraf, Idan Dardikman, and Itay Kruk, Koi quickly gained attention for tools aimed at securing emerging risks associated with software supply chains and AI agents — autonomous tools capable of accessing and operating within corporate systems.(ctech)
After raising about $48 million across seed and Series A rounds, Koi entered acquisition talks with Palo Alto Networks, one of the world’s largest cybersecurity firms. That deal was quickly finalized, with reports suggesting a $400 million valuation for the startup.(Palo Alto Networks)
However, in the race to complete the sale, most of Koi’s roughly 60 employees had not been formally granted stock options, a standard form of compensation in startup compensation packages that can become extremely lucrative in an exit event. Only about 10 early hires had formally received option allocations before the acquisition process concluded.(ctech)
🤝 Founders Step In with Personal Compensation
The oversight sparked employee frustration — understandable, given that the value unlocked by the sale largely flowed to investors and founders, many of whom were poised to pocket millions each. In response, Koi’s founders reportedly committed to allocating part of their personal proceeds toward compensating team members in amounts roughly equivalent to what they would have received had options been granted.(ctech)
This ad-hoc solution highlights a frequent tension in fast-moving startup exits: when timing outpaces internal processes, employees can sometimes miss out on the financial windfall they expect in an acquisition scenario. Even within established norms — where startups commonly reserve 10–15% of equity for employee option pools — administrative complexities can cause gaps that leave teams under-rewarded unless founders make discretionary adjustments.(ctech)
🧠 Why Palo Alto Bought Koi
From an industry perspective, Koi was an attractive acquisition target because of its AI-centric approach to endpoint security — especially as modern software environments become more complex with plugins, packages, and autonomous AI agents. Palo Alto Networks has said the deal helps address “agentic endpoint” security, where traditional solutions struggle to detect threats from non-traditional software components operating on corporate networks.(Palo Alto Networks)
Specifically, Koi’s platform analyzes and governs software before it executes in enterprise systems, giving organizations deeper visibility and pre-emptive control over risky code. Palo Alto plans to integrate this capability into its broader security offerings, including its Prisma AIRS AI security platform and Cortex XDR endpoint protection suite.(Palo Alto Networks)
💡 What This Means for Startup Teams
Koi’s sale underscores several important lessons for employees, founders, and investors alike:
- 📋 Option grants matter — and timing is crucial. Without formal documented allocation, team members can miss out on the financial upside of major liquidity events.
- 🧠 Fast acquisitions increase risk of administrative oversights. Deals that move quickly can sometimes outpace internal compliance and equity-management procedures.
- ❤️ Founder responsiveness matters. The founders’ move to compensate employees personally signals leadership commitment — but not every startup will (or can) make that choice.
- 📊 Early-stage compensations are negotiations. Employees and founders alike benefit from clarity on equity structures from day one.
For the global tech community — and especially for tech workers in fast-paced markets like cybersecurity — Koi’s story is a reminder that success isn’t just about the size of the exit, but who gets to share it.
🔍 Glossary
Stock Options A form of employee compensation that gives the right to buy a company’s stock at a fixed price. In startup exits, options can become valuable if the sale price exceeds the strike price.
Equity Pool / Option Pool A percentage of company ownership set aside to grant stock options to employees.
AI Agents Autonomous software tools that can perform tasks, make decisions, or access systems without human intervention.
Endpoint Security Tools and strategies used to protect devices (laptops, mobile devices, servers) that connect to a network against cyber threats.
🔗 Source: https://www.techinasia.com/news/israels-koi-sold-palo-alto-employees-options (techinasia.com)
