Cybersecurity Enterprise Venture

Where VCs Are Putting Their Money As Cybersecurity Funding Hits Record High

Illustration of masked thief peeking through keyhole on laptop screen.

Last year proved not even a pandemic could slow investors’ appetite for cybersecurity. Now with a possible light at the end of the COVID tunnel, investors are being bold about doubling down.

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“The market is more crazy than ever before,” laughed Luke Page, general partner at RTP Global, during an interview with Crunchbase News.

The first quarter of this year saw more than $3.7 billion invested globally into cybersecurity — outpacing the $2.3 billion for the first quarter last year, according to a new cybersecurity report by Crunchbase. If this level of investment continues, the industry would shatter last year’s record of $7.8 billion invested globally and see the sector hit nearly $15 billion in total venture investment.

Cybersecurity has been a hot buzz word in tech for years, but COVID and the changes in the workforce it caused seems to have highlighted its importance even more as the attack surface for bad actors to exploit grows and as more companies move to the cloud. With many now working from home — and doing it on their own WiFi and away from more secure company networks — employers have been forced to juggle work accessibility with security.

Simultaneously, many of the same companies are going through their own digital transformation, putting more processes in the cloud that need their own layers of protection.

All of that together, along with headline-grabbing attacks such as the SolarWinds incident, have helped push significant money into a plethora of sub sectors inside cybersecurity — such as cloud security, application security, bot mitigation and cyber insurance to name just a few.

“There’s vendor overload right now, but it’s such a huge pain point,” said Martin Angert, a director at Susquehanna Growth Equity, of the security industry. Angert’s firm participated in a $75 million Series D for security provider WhiteSource last week.

Robert Keith, managing director at Salesforce Ventures1, said the industry is seeing new highs for several reasons.

“Companies have changed how they work with customers and employees,” he said. “When how you work and communicate changes, you need new security, and there are new companies to provide that security.”

Platforms and tools that help with collaboration and securing email, video conferencing and messaging should continue to interest investors, Keith said.

Additionally, the performance of cybersecurity companies in the public markets has encouraged VCs to keep their checkbooks out, he added. Companies like CrowdStrike, Cloudflare and Datadog all have done well in the market and that excitement has hit VCs, too.

“VCs are willing to write larger checks,” he added.

Those larger checks have helped make the first quarter a banner period for new unicorns. In the first three months, nine new unicorns were minted — already besting the record six in all of last year for the sector.

What may be most interesting is the diverse areas of cybersecurity the companies come from, as companies like San Francisco-based cyber insurance provider Coalition, Israel-based cloud visibility developer Wiz and Los Angeles-based security and compliance provider Orca Security help illustrate the wide range of sectors within cybersecurity that interest investors.

With investment in cybersecurity increasing more than ninefold since 2011, there is little reason to suspect the flow of cash from VCs will slow anytime soon.

“There’s just so much dry powder on the sidelines right now,” said ThreatQuotient CEO John Czupak, whose company just closed a $22.5 million funding round last week.

Czupak said with private equity, venture and SPACs there is so much competition among investors in the space as they realize there is too much upside in the industry right now not to put their money to work in the sector.

“If you get cyber right, you can get it very, very right,” he said.

Illustration: Dom Guzman

  1. Salesforce Ventures is an investor in Crunchbase. It has no say in our editorial process. For more, head here.

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