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Cisco Expanding Its Startup Investing Strategy

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Oct. 25 2018, Updated 7:31 a.m. ET

The new fund seeking to raise $500 million

Cisco Systems (CSCO) is setting up a new venture fund that is expected to focus on early-stage startups, according to a CNBC report citing regulatory filings. The fund, called Catalyst Labs, is seeking to raise $500.0 million in capital for startup investing. Cisco is listed as the principal investor in Catalyst Labs, and New Enterprise Associates veteran Jon Sakoda is expected to run the fund, according to the report.

Because Cisco’s startup investing has mostly focused on late-stage companies, getting into early-stage startup investing would mark an expansion of the company’s startup investing strategy.

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Diversifying the business

Cisco Systems (CSCO) seems to be expanding its startup investing strategy at a time when it has also sought to diversify its business by entering new markets such as cybersecurity. The company said its security revenues increased 12.0% YoY (year-over-year) to $627.0 million in its fourth quarter, which ended in July.

Setting up a fund to invest in early-stage startups is part of Cisco’s strategy to stimulate growth. The company’s revenues rose 5.9% YoY to $12.8 billion in its fourth quarter.

Palo Alto Networks (PANW), FireEye (FEYE), and Symantec (SYMC) grew their revenues by 29.3%, 5.7% and 1.6% YoY, respectively, in a similar period.

At least four startups backed

As of October 12, Cisco had invested in four smaller companies since the beginning of the year, according to CrunchBase data. IBM (IBM) had invested in one smaller company, and Microsoft (MSFT) had invested in about ten smaller companies in the same period.

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