American private equity giant AE Industrial Partners recently acquired Paragon, an Israeli spyware company that has kept a very low profile in recent years. According to reports from Israeli media, the deal is worth $500 million upfront and could reach up to $900 million depending on the company’s future growth.
This acquisition highlights the growing interest of Western investors in Israeli spyware companies. The spyware industry often compares Paragon, one of the newer companies, to other major spyware providers. Despite its influence, Paragon does not have a website and has remained largely under the radar since its founding.
Details of the Acquisition Deal of Paragon
The deal, as reported by Israeli outlets, comes with a breakdown of payments. Out of the $450 million upfront amount, 20% will be shared among Paragon’s 400 employees. Another 30% will go to its co-founders, while the remaining 50% will be split between U.S. venture capital firm Battery Ventures and Israeli venture capital firm Red Dot.
Paragon’s business model focuses on developing spyware tools that can hack into smartphones. These tools can access apps such as WhatsApp, Signal, Gmail, and Facebook Messenger, giving its customers the ability to collect data from targets. The spyware tool offered by Paragon is known as “Graphite.” It has been described as a competitor to Pegasus, a controversial spyware product created by the NSO Group.
Paragon gained international attention when it was reported that the U.S. Immigration and Customs Enforcement (ICE) agency had signed a $2 million contract with the company. The deal included software licenses, hardware, training, and support. Reports indicated that Paragon was able to pass U.S. vetting procedures by demonstrating its tools could not be misused to target American residents. This vetting is significant because misuse of spyware tools has been a major issue with other companies in the past.
Rise of Paragon in the Spyware Industry
Paragon was first revealed to the world in 2021 when media reports described it as a company founded by former members of Israel’s top intelligence units. These units have a reputation for producing some of the world’s most skilled cyber and intelligence professionals. Many of these experts move to the private sector after their service, launching cybersecurity and spyware companies like Paragon.
The company’s flagship product, Graphite, operates similarly to other well-known spyware tools. It gives clients the ability to extract information from a target’s smartphone, including encrypted apps and emails. Spyware tools like this are often used by government agencies for surveillance purposes.
The spyware industry, however, has faced significant controversies. Some companies have been accused of allowing their tools to be misused for hacking journalists, activists, and even foreign government employees. For example, NSO Group’s Pegasus spyware has faced global criticism after reports of misuse emerged. These reports led the U.S. Department of Commerce to place NSO Group on an economic blocklist in 2021. This blocklist effectively banned American companies from working with NSO Group.
Western Investment in Israeli Spyware Firms
Paragon’s acquisition is part of a larger trend where Western investment firms are buying Israeli spyware companies. In 2014, a U.S.-based private equity firm acquired a large stake in NSO Group, highlighting the strong financial interest in this industry. Similar investments have been made in other spyware and cyber intelligence companies over the years.
Despite its quiet public profile, Paragon’s tools have made it a key player in the spyware market. While other companies have faced challenges due to allegations of misuse, Paragon’s recent partnership with ICE shows it has successfully entered the U.S. market. Reports also claim the company implemented controls to prevent misuse of its tools, which has helped it secure critical contracts.
This acquisition signals a significant development for Paragon and its investors, as well as for the spyware industry. The deal highlights the value placed on advanced surveillance technologies and their demand among government agencies worldwide.
The spyware industry remains an area of global interest, especially as more countries seek tools to monitor communications and data. While companies like Paragon have been able to build their businesses under the radar, acquisitions like this bring them into the spotlight.
This $500 million deal further demonstrates the growing influence of spyware technology in global security and surveillance operations.
