Cybersecurity Funding Reaches All-Time High Amid COVID-19
Cloud security, IAM, endpoint security and XDR are four of the big winners in the funding spree.
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The United States recorded 76% of all global cybersecurity funding in 2020, at nearly $6 billion, according to Crunchbase. U.S. funding grew 22% from 2019 to 2020.
Israel is the second leading country in the industry. More than 20% of that country’s venture funding went to cybersecurity companies in 2020.
Investment in cybersecurity companies has increased more than ninefold since 2011. The pandemic accelerated the momentum of cloud security companies like Lacework, Aqua Security, OwnBackup, Axonius and more. All raised rounds of more than $100 million since the pandemic began. And Expanse, which announced exceeding 100% year-over-year growth in October 2020, was gobbled up by Palo Alto Networks to the tune of $800 million.
Chart courtesy Crunchbase
Last year recorded six new cybersecurity unicorns (defined as a startup with a value of more than $1 billion). That’s a single-year record, according to Crunchbase. SentinelOne, Arctic Wolf and Cato Networks are among the unicorns.
In 2021, more than $3.7 billion in cybersecurity investments have been recorded globally so far. This is on pace to smash the 2020 record, according to Crunchbase. If the momentum continues, the industry could reach nearly $15 billion by the end of the year.
Chart courtesy Crunchbase
Just a few months into 2021, nine new cybersecurity unicorns have already emerged, well surpassing the 2020 record. Among them are Armis Security, Coalition, Wiz, OwnBackup and Axonius. They include IoT security, cloud security, cyber insurance and predictive analytics providers.
So, what does this surge in cybersecurity funding mean for those working in the industry and looking to start their own cybersecurity firms? You better be able to coherently articulate your strategy and tell your story, said Hank Thomas, CEO of Strategic Cyber Ventures.
“Why you?” he said. “Why your idea? What security requirements are your team or tech going to be mapped to? They don’t have to be 2020 requirements. They can be requirements for years down the road. That’s what venture capital investment and strategic planning is for. But you better have a clear vision of what the next few years is going to look like in your mind, and be able to explain it so that investors and customers can quickly share your mental image and vision of the future.”
Last year featured mostly tactical movements to keep up with the unexpected and rapid shift to virtual, Thomas said.
“The remainder of 2021 and 2022 will see more operational- and strategic-level moves as a new, more permanent, security framework is established to support the hybrid workforce environment,” he said. “Once herd immunity is achieved and hybrid is officially declared the way we will work for at least the next few years, expect even further security platform consolidation. Expect bigger tech companies, pure-play large cybersecurity firms, SPACs and private equity firms to all be major players in these rollups to better platform strategies.”
Last year featured mostly tactical movements to keep up with the unexpected and rapid shift to virtual, Thomas said.
“The remainder of 2021 and 2022 will see more operational- and strategic-level moves as a new, more permanent, security framework is established to support the hybrid workforce environment,” he said. “Once herd immunity is achieved and hybrid is officially declared the way we will work for at least the next few years, expect even further security platform consolidation. Expect bigger tech companies, pure-play large cybersecurity firms, SPACs and private equity firms to all be major players in these rollups to better platform strategies.”
Cybersecurity funding jumped to an all-time high last year, driven by an increase in security events during the COVID-19 pandemic.
That’s according to Crunchbase’s Rise Of Global Cybersecurity Venture Funding report. Other driving factors include remote work and companies moving operations online.
Despite the pandemic, 2020 was a record year for cybersecurity investments, with more than $7.8 billion invested in the industry globally.
Hank Thomas is CEO of Strategic Cyber Ventures.
Strategic Cyber Ventures’ Hank Thomas
“Clearly we have had an unprecedented, rapid and unexpected experiment, quickly turned movement, to a decentralized workforce,” he said. “This has forced cybersecurity strategists and operators to move and create new security controls that protect these now more heavily used communications paths, as well as the places people are increasingly storing data and running analytics. Cloud security, identity and access management (IAM), endpoint security, and extended detection and response (XDR) are four of the big winners if you follow the money.”
New cybersecurity startups capitalized on the opportunity from remote work, and venture capitalists flooded the industry with new funding.
About 1,500 cybersecurity companies globally have received venture funding since 2017 and have not yet emerged from stealth. About 58% are seed-stage companies, 32% are in early stage and 10% are in late stage.
Scroll through our slideshow above for more statistics and commentary on this funding rush. Charts courtesy Crunchbase.
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