Cybersecurity Funding Rounds Increase in Q3, But Dollar Amounts Lag

The third quarter of 2023 brought a 21% increase in cybersecurity funding compared to same quarter in 2022, painting an optimistic picture of the industry's growth trajectory.

That's according to Pinpoint Search Group, a cybersecurity recruitment firm. In Q3, Pinpoint's research team recorded 113 combined funding and M&A transactions within the cybersecurity space.

The total funding reached $2.3 billion, signaling a stark rise from the previous year's Q3 figure, according to Pinpoint. Interestingly, the 89 funding rounds documented in the third quarter marked a significant surge from the 56 rounds observed during the same time frame in 2022. Moreover, the quarter witnessed 24 crucial M&A activities, including Cisco’s massive $28 billion acquisition of Splunk in September.

Cybersecurity Funding to Continue for Advanced Technology

Mark Sasson, Pinpoint's managing partner, said "when we talk about an increase, it’s important to put that into perspective."

"While investment increased over the last quarter, the funding raised in Q3 2023 remains lower than most of the quarterly investment we tracked in the fiscal years of 2021 and 2022," he said. "It could be that 2021 and 2022 will, in hindsight, be considered the boom times for cybersecurity investment, and today’s trends are going to be more baseline. Alternatively, if 2021 and 2022 were baseline, then the increase could represent a return to the norm. One thing is certain, cybersecurity is a growing industry and demand will persist. Because of the constantly changing technology landscape, innovation in the sector is a must and investors will continue funding advanced technology in the space."

However, a new Canalys report on cybersecurity vendor funding shows new investment secured by pre-IPO cybersecurity vendors declined on an annual basis for a sixth consecutive quarter in Q3 as the funding crunch continued. (Canalys is owned by Channel Futures' parent company, Informa.) Overall, funding was down by 33%, to $1.89 billion, in the quarter, and down by 53% in the year to date. This pullback of venture capital has resulted in startup and growth-stage cybersecurity vendors scaling back expansion plans, cutting operating costs and lowering growth targets.

Scroll through our slideshow above for more from Pinpoint and Canalys on cybersecurity funding.