Investors are Paying Attention to Cybersecurity. Here's Proof
Cybersecurity is a key area of interest for many investors – and this makes sense, given how rapidly the industry is growing. In 2021, the global cybersecurity market was valued at $217.9bn, and in 2026, it is forecasted to be worth $354bn. This growth is being driven by various factors. One definite cause is the fact that more and more people are now working remotely, which has increased the demand for cybersecurity teams that can address the new risks that this change entails. For example, during the first quarter of 2021, threat actors launched 2.9 million DDoS attacks, a record high, and a 31% increase from the same time in 2020.
Across the world, 18% of people now work remotely full-time while 16% of companies in the world are 100% remote. People have also been spending an increasing amount of time online, in general. The pandemic has helped to drive these changes.
There are many signs that investors are paying close attention to the cybersecurity industry. We have compiled the latest research that shines a light on this trend, which is worth highlighting.
Cybersecurity VC Funding Reached Record Levels in 2021
According to a cybersecurity market review from Momentum Cyber, investors contributed $11.5bn in total venture capital financing into cybersecurity startups in the first half of 2021. These are record levels of investing. To put this figure into perspective, $11.5bn is up from $4.7bn during the same period a year earlier. So the increase in investing is substantial.
Over 36 of the 430 total transactions surpassed the $100m mark. The investments include the $543m Series A raised by passwordless authentication company Transmit Security and the $525m round closed by cloud-based security company Lacework.
Bob Ackerman, founder and managing director of AllegisCyber Capital, which has invested $26.5m in cybersecurity startup Panaseer, said:
“As an investor in the cyber market for over 15 years, I can say that this market climate is unlike anything we’ve seen to date. It is encouraging to finally see CEOs, boards of directors, investors and more paying serious attention to this space and putting the resources and capital in place to fund the innovations that address the cybersecurity challenges of today and tomorrow.”
The Rise of APIs
The amount of APIs – including web, mobile, and third-party – in use has expanded massively in recent years. A report by internet company Akami Technologies found that 83% of all web traffic now goes through APIs. API security providers, therefore, are attracting serious interest from investors.
Big companies such as Peloton, Clubhouse, Experian, and John Deere have run into API security incidents. Gene Fay, CEO of ThreatX, said his company has been a multiple-fold increase in API attacks in 2021 compared to the previous year, as cyber attackers have used the pandemic to hone their skills.
Although API security has recently attracted investors’ attention, it is still a nascent space when compared to other areas of cybersecurity. But while that is the case, companies that describe themselves as securing APIs have still attracted more than triple the amount of venture funding in 2021 than in 2018 and 2019 combined, according to Crunchbase data. Also, aside from the recent funding rounds, the API security space has seen some dealmaking. Cyber giant Imperva has bought California-based API security developer CloudVector, for example.
Larry Link, CEO of California-based API security provider Cequence Security said he could see VMware, Splunk, and Crowdstrike looking more into the area of API security.
Investors Put Cybersecurity Top of the Business Threat List
A previous PwC study has found that cyber attacks are the biggest threat to business, according to investors. Given that cyber attacks are evolving all the time, and have become more prominent in recent years, this is unsurprising. What it means, however, is that investors will be more interested in companies that are helping to enhance cybersecurity and reduce the threat of security incidents and the various business costs that entails.
To improve trust with consumers, investors believe businesses should prioritize investment in cybersecurity protection. The other main threats to growth that investors have identified include geopolitical uncertainty, speed of technological change, populism, and protectionism. Business leaders, on the other hand, rank over-regulation and terrorism as higher threats to businesses than cyber threats. Hilary Eastman, head of global investor engagement at PwC, stated:
“The survey findings suggest investors are more concerned about the risks associated with rapidly evolving technology than CEOs. Investing in cybersecurity, digital skills and training will be crucial for business leaders if they want investors to have confidence in their companies.”
Large Scale Spending on Cybersecurity is Vital
Echoing the opinion of investors from the PwC study, Joe Fiorica, Global Head of Equity Strategy at Citi, has said that, as a result of intensified cybercrime, “Large scale spending on cyber security is therefore both vital and likely to accelerate, presenting a potential opportunity for investors.”
Stealing data and ransoming businesses with vulnerable networks is becoming its own industry. Ongoing expenditure on cyber security is not discretionary but essential to protect corporate and personal assets. Fiorica underscores that companies that help protect cloud computing and the Internet of Things (IoT) are among the major beneficiaries of increased investment into cybersecurity.
As we can see from the above research and trends, investors will continue to pay serious attention to cybersecurity in the coming years. It’s crucial that organizations – of all types and sizes – are able to draw on the cybersecurity solutions they need to protect their systems and assets from cyber threats.
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