Don’t Expect A Slowdown After Record-Setting Year For Cybersecurity As Several Drivers Remain For Big 2022

Even though this year was unlike any other for cybersecurity—with more than $20 billion invested into the sector—2022 may very well build off that momentum, according to many in the industry.

While this year was driven to new heights by several sectors like cloud, API security, health care IT and insurance, next year should see a continuation of several of those trends, and some newer ones that started to emerge in the later half of 2021.

What will whet the appetite of investors in the new year? That’s always difficult to say, but these are subsectors and themes that seem primed to elevate their status as as venture dollars continue to flood the cybersecurity startup ecosystem:

Crypto

There is no denying the explosion the crypto market saw in 2021 and the crazy venture dollars that have poured into the space. That has helped the industry around securing the new currency market explode as well.

In late November, New York-based Fireblocks—which attempts to solve a variety of issues around crypto including security, compliance and governance—raised a $400 million Series E round from Sequoia Capital at a valuation of $8 billion.

The round marked the company’s third raise this year, and others such as New York-based Chainalysis—which gives analysis of blockchain data and crypto transactions to governments, banks and businesses—also have raised multiple large rounds as technologies that secure digital wallets and transactions seemed to pique investors’ interest as the year worn on.

Steve Ward, a former CISO and now managing director at Insight Partners, said areas within cryptosecurity, such as coin monitoring, will be critical if the digital currency is to keep increasing in popularity.

“I don’t think there will be widespread adoption until you have proper monitoring,” he said.

Further widespread adoption should make the space of securing crypto even hotter. As more traditional banks and financial institutions embrace cryptocurrency and it becomes more a part of people’s vernacular, securing how those digital assets move and are stored will become analyzed even more by investors. Expect large payment companies and even traditional market exchanges to look carefully at the space around security, reporting tools and analytics in the new year.

Compliance and auditing

Cybersecruity loves hot buzzwords and phrases, so let’s combine two for what could be the next big trend in 2022.

“Another movement we see building steam in 2022 is what I would call the shifting left of compliance,” said Leo Scott, chief innovation officer at cybersecurity foundry and investment firm DataTribe.

The practice of “shift left” is intended to find errors early in software delivery, while “compliance” in the security world helps make sure best practices are followed and typically include third-party audits. Scott said he is seeing a move toward a world that would allow developers and IT departments to formally verify that software is in compliance with a specification before the software goes into production.

“Recent activity in formal verification has been related to smart contract security audits,” he said. “There has been a ton of innovation by smart contract auditing companies like CertiK and Certora.”

Just earlier this month, New York-based CertiK completed a $80 million Series B2 at nearly a $1 billion valuation.

“We’ve recently seen a couple early startups working on this,” Scott said. “Another company focused just on the smart contract space, but is further along than the companies we have seen, is (Spain-based) OpenZeppelin.”

Although not the sexiest space in cyber, the entire process of securing software earlier and earlier is becoming more crucial. Compliance and contract security contract audits can play a key role in that.

Securing the unknown

With all the talk around the metaverse and Web3—mostly about what they are and how they will be adopted—questions surrounding data, privacy and securing identity also continue to swirl.

That could spell big dollars for startups that look specifically at those things as users look to be more in control of all of it in a more decentralized environment that may not be dependent on tech giants like Google and Meta.

One of those main themes likely to come up again and again is the idea of “portable identity,” or a user’s ability to take everything—from social and professional graphs to relationships on various digital platforms—with them seamlessly will probably play a big role.

“Identity has to be real and it has to be portable,” said Matthew Goldstein, a managing director at M12, who invests in cybersecurity.

Identity management and authentication already saw a record-setting year in 2021, but startups that look beyond and into the next stage of life of the internet could be big winners—even if that means they are acquired by larger ID companies like Okta or ForgeRock, or the by the tech behemoths like Meta and Google if that is the way this new connectivity chapter turns.

Illustration: Dom Guzman

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