Today, two cybersecurity companies made waves in the worlds of both tech and business, raising huge sums for their companies and reaching new thresholds of corporate maturity. One raised a pile of capital, pushing its worth over the psychologically-important $1 billion mark. And the other raised a pile of capital, going public in the process.
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Security training company KnowBe4 picked up $300 million in growth equity funding to become a fresh unicorn. And CrowdStrike, a leading player in the endpoint security space, officially hit the public markets at a $6.6 billion valuation that it quickly outstripped. The company raised $612 million in its debut.
This is just the latest news in the cybersecurity startup industry, which has experienced significant activity over the past couple of years.
Last May, endpoint security company Carbon Black went public at a $1.3 billion valuation, raising $152 million and popping 30 percent in its debut. Identity management company, Duo Security, also made an exit, being acquired by Cisco last August for $2.35 billion. Duo’s main competitor, Okta, made its splash in the public domain when it went public in 2017.
There are a few reasons cyber is hot right now. First of all, data breaches and cyber attacks have been top of mind. From retail companies and tech behemoths to government bodies, organizations have struggled to keep sensitive data protected.
“It’s evident that the B2B security industry is experiencing a renaissance. While the market is stronger than ever, there is a massive market cap shift from legacy security vendors like Splunk, McAfee, Symantec, and Check Point… to the new breed of leaders,” General Partner at Icon Ventures Jeb Miller told Crunchbase News in an email.
And that’s because, he wrote, many of those previous leaders were founded before the massive data influx that started in 2005.
“Keep in mind, 90 percent of the data ever generated was created in the last two years,” Miller expressed. Couple that with the fact that enterprises have broadened the scope of their services with cloud, mobile, and APIs, malicious activity has increased both in the private and public sector, and data requirements have grown exponentially, added Miller, those legacy players are ”falling behind.”
And where legacy players fall behind, startups rush ahead.
New Tech, Fresh Funding
It’s clear that investors are interested in new tech in the cybersecurity industry, and corporate investors are betting on new innovation as well. In April, Crunchbase News’s Natasha Mascarenhas wrote about Okta’s new $50 million venture fund, which it will use to invest in early stage security companies. The company told Mascarenhas that the company recognizes the value AI and other advancements can add to its own platform.
That understanding by corporate entities and investors alike has led to a flurry of funding rounds in the space. Take a look at some of the companies that have banked funding since the beginning of 2019. 1
According to Miller, next-gen players are addressing the changing nature of attacks with AI and other predictive and automated technology. And they’re doing it across security categories including firewall security, endpoint security, identity management, and security information and event management. Just last week, Crunchbase News spoke to SentinelOne, an enterprise security platform using machine learning technology that can detect threats and mitigate them.
What’s interesting about KnowBe4, in particular, is that it’s addressing an issue that founders like Exabeam‘s Nir Polak have told Crunchbase News is a billion dollar issue: humans. Its enterprise service trains and analyzes employee responses to phishing attacks. The company is going after a category of security that can cost companies a chunk of money and that’s difficult to address.
While the cybersecurity industry may not be as outwardly interesting as scooters or food delivery, it’s deservedly gaining a lot of recent traction. With legacy players trying to catch up to the changing nature of security and B2B SaaS stocks peaking investors’ attention, it’s the perfect storm for founders with innovative ideas and new tech to back them up. Miller agrees.
“It’s an exciting time to be an investor in the space, and I hope many others follow suit.”
Illustration Credit: Li-Anne Dias
List not exhaustive. ↩