Cybersecurity Funding Jumps in Q2, Startups Dominate Funding Rounds

Cybersecurity funding jumped during the second quarter of 2024, a positive indicator for an industry that has undergone considerable changes over the past year. 

That’s according to Pinpoint Search Group’s Q2 2024 cybersecurity funding report. It reveals a slight increase in the number of transactions compared to the second quarter of 2023, but a significant increase in the total amount of funding raised. Pinpoint Search Group is a cybersecurity recruitment firm.

In the second quarter, Pinpoint Search Group’s research team recorded 120 transactions among cybersecurity vendors, totaling $3.3 billion across 98 funding rounds and 22 M&A events. This represents about a 1% increase in transaction volume from 97 in second-quarter 2023 and a 71% increase in fundraising from the previous year's $1.9 billion. The 71% year-over-year increase is skewed due to the $1 billion raised by Wiz in May; however, even excluding that round, the second quarter still saw a 21% increase over the previous year. 

Cybersecurity Funding Remains Below Earlier Years

Mark Sasson, founder and managing partner at Pinpoint Search Group, said cybersecurity is still a maturing industry driven by startup innovation. Annual investment in security has swung wildly over time.

Pinpoint Search Group's Mark Sasson

“While there is no question that investment rebounded when compared to the same period last year, funding for Q2 2024 remains below Q2 funding for 2022 ($4.3 billion) and 2021 ($4.9 billion),” he said. “Funding trends and baselines are still developing for security vendors. Massive investment in 2021 and 2022, in hindsight, may have been driven by hype. [Last year's] economic challenges may have caused the pendulum to swing far in the opposite direction. As opposed to a surge, we may simply be seeing the shaping of a more sustainable trendline with the numbers in 2024.”

Early-stage startups have dominated funding volume, with 55% of all rounds in the second quarter going to seed and series-A stage organizations, Sasson said.

“And that makes sense,” he said. “Security needs to adapt to threats evolving from rapidly advancing technology. These startups are essentially industry incubators and are vital to the ecosystem.”

Later-Stage Growth Companies Get More Funding Dollars

Later-stage growth companies represent substantially less volume, making up 13% of all funding rounds in the second quarter, Sasson said. However, they represent 65% of all funding dollars.

“This makes sense as later-stage companies require much bigger rounds of investment,” he said. “The great thing here is that we are seeing maturing companies in the industry adapting to the evolving landscape. This contrasts with the previous generation of mature startups, which were generally unable to adapt. Many faded away in the past year or so.”

There are thousands of cybersecurity vendors globally, and that remains consistent with the competitive landscape that has evolved in the past decade, Sasson said.

“I’m inclined to say that 2024 will outpace 2023 in terms of dollars raised by cybersecurity companies,” he said. “While we are a far cry from the market optimism of 2021 and 2022, competition for talent – largely driven by funding – is up when compared to this time last year. Many of the candidates we are representing are being approached by multiple cybersecurity firms and are receiving several offers to choose from, which was not the situation last year.”