Cloud computing Cybersecurity Quarterly and annual reports SaaS Venture

Cybersecurity Funding Continues Slide In Q3

Illustration of guard dogs protecting computer.

For the fourth straight quarter, funding to VC-backed cybersecurity startups decreased—as even one of the most resilient industries showed it is not immune to the venture capital pullback.

The recently ended third quarter saw only $2.6 billion go to startups in cyber, the lowest total since the same quarter in 2020, which saw $1.6 billion invested, according to Crunchbase data.

“The market’s fluctuations have affected all tech sectors in the past six months,” said Ofer Schreiber, partner and head of the Israel office for cyber venture firm YL Ventures. “We’ve definitely seen reactions in the cybersecurity sector that coincide with the general wariness of both investors and vendors.”

Search less. Close more.

Grow your revenue with all-in-one prospecting solutions powered by the leader in private-company data.

Deal flow diminished in the quarter, which saw only 124 funding deals announced—the lowest since the third quarter of 2014.



Despite the downward trend in venture funding for the sector, several companies saw big rounds in the third quarter. The three biggest rounds of the quarter were:

Changing perspective

While the Q3 numbers may not paint a rosy picture for startups looking to raise money, it should not come as a shock. Most of the large, publicly traded cyber firms are down year to date also, with some such as Fortinet and CrowdStrike down 10% or more.

It’s also important to look at the past for some perspective.

Although it may be the lowest quarter since 2020, the first three quarters of 2022 have already surpassed the total amount of venture capital raised in 2020. Already this year, startups have seen nearly $13 billion of funding, compared to $8.9 billion in 2020.

Stephen Ward, managing director at Insight Partners who invests in cybersecurity, said he has noticed a slowdown in cyber investments given the current economic pressures. However, cybersecurity has proven to be very resilient during these times, especially considering the geopolitical climate and how that has increased concerns over cyberattacks.

Regardless, the sector has decelerated and startups need to be careful when it comes to money.

“Founders are continuing to proactively manage their burn rates and operate more efficiently to extend their runways,”said Ward.

Big rounds

Growth rounds seem to be bearing the brunt the downturn, while Series A rounds have been more moderately affected and the sums of seed rounds have actually increased, Schreiber said.

“While cybersecurity continues to be a generally resilient sector when compared to those that were severely affected in the past year, we do see a hesitant investment landscape in growth stages,” he said.

That is borne out in the numbers. Through three quarters last year, there were 49 rounds of $100 million or more, compared to only 39 in the same period this year, according to Crunchbase data.

That includes only seven such rounds in Q3.

Areas of growth

Even with the sliding funding numbers, investors say they are still seeing some areas of growth.

“We have seen several key trends in the cyber world become more pronounced in the past year, including CISOs wanting faster time to value, remediation instead of identification, and platform tools over point solutions,” Ward said.

There are also added security technologies being built for DevOps, as more of a “shift left” approach is being taken where software is performed earlier in the lifecycle, he added.

Schreiber said his conversations with cybersecurity professionals and investors—as well as his own market observations—have shown substantial investor interest in a plethora of subsectors such as application security, security automation, cloud data security, identity and access management, and the SaaS security space.

Although this year will not reach the funding highs of last year as valuations come down and investors go bargain hunting, 2022 also has seen more malicious actors and cyberattacks grow in both scope and sophistication—continuing to emphasize the need for cybersecurity.

“Investors want to get in early on this market demand for the next great security product, which is one reason why we’re still seeing investor interest in early-stage rounds,” Schreiber said.


Cybersecurity is defined by the industries of network security, cloud security and cybersecurity, according to Crunchbase data. Most announced rounds are represented in the database; however, there could be a small time lag for rounds reported late in the quarter.

Illustration: Dom Guzman


Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

Copy link