Dark Reading is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Attacks/Breaches

1/18/2019
04:30 PM
Connect Directly
Twitter
LinkedIn
RSS
E-Mail
50%
50%

VC Investments in Cybersecurity Hit Record Highs in 2018

But rate of funding appears unsustainable, according to Strategic Cyber Ventures.

Investors continued to pour money into the US cybersecurity market last year, as well as into several other countries, notably the UK, China, and Israel.

New data from Strategic Cyber Ventures shows that venture capital investments and average deal sizes involving cybersecurity firms both reached record highs in 2018.

At $5.3 billion, VC funding in 2018 was about 20% higher than the $4.4 billion in 2017 — and a whopping 81% higher than in 2016, when the market witnessed a slowdown of sorts. The total number of deals in 2018, at 332, was slightly lower than the 345 deals VC firms struck with cybersecurity firms in 2017. However, the average deal size of $15.8 million in 2018 was a record.

Much of the "heavy right skew" in deal sizes had to do with a handful of megadeals involving transactions of over $100 million, according to Strategic Cyber Ventures. In total, there were eight such transactions last year — and seven companies — that accounted for nearly $1.4 billion in VC funding. In comparison, the seven transactions that were over $100 million in 2017 totaled about $730 million.

VPN provider AnchorFree secured the largest deal last year — a $295 million round of funding led by WndrCo, with participation from several other firms, including Accel, SignalFire, and Green Bay Ventures.

Other companies that secured substantial funding in 2018 included Tanium, which raised $375 million in two separate funding rounds, giving it a valuation of $6.5 billion; CrowdStrike, with a $200 million Series E funding round in July that valued the firm at $3 billion; and Netskope, with a $168 million deal in November. For several of the vendors with megadeals last year, the investments were their second or third rounds of funding and were likely a prelude to an IPO this year, Strategic Cyber Ventures said in its report.

Cybersecurity mergers and acquisitions activity remained strong last year. Among the biggest were Cisco's $2.4 billion purchase of Duo Security; BlackBerry's $1.4 billion acquisition of Cylance; and RELX Group's $817 million buyout of ThreatMetrix. Thoma Bravo's $1.6 billion acquisition of Barracuda was the biggest of several major private equity investments in the cybersecurity space last year.

Cybersecurity companies with IPOs in 2018 generally fared better that companies in 2017. The four biggest IPOs on the major stock exchanges last year — Avast, Tenable, Zscaler, and Carbon Black — raised about $1.4 billion—or nearly double that raised by the top four companies with IPOs in 2017.

"There are several reasons 2018 was a record year for cybersecurity investment," says Chris Ahern, principal at Strategic Cyber Ventures.

VC markets were flush with funds, and money from some massive funds that were formed over the past few years made its way to the cybersecurity market, Ahern says. There also were some strong exits in the space via IPOs and M&As. "The problems aren't going away," Ahern notes. "2018 had several massive, high-profile breaches, and I think we'll continue to see this into 2019."

Impressive as the investor interest has been, the outlook for the future is somewhat unclear. Ahern does not think the rate of investment in cybersecurity is sustainable for much longer. "We're seeing increased competition in the space, vendor fatigue expressed by CISOs, and 'noise' from companies that throw around buzzwords like 'AI' that distract from real builders of cybersecurity companies," he says.

Eric McAlpine, managing partner at Momentum Cybersecurity Group, which is about to release its own report on VC and M&A activity in cybersecurity, says last year indeed was a "banner year" for vendors in the space.

Momentum's numbers for investment activity in 2018 are higher than that of Strategic Cyber Ventures. According to McAlpine, investors poured in a record $6.2 billion into cybersecurity compared with $5.4 billion in 2017, which in itself was a record.

But a close examination of the numbers shows fewer deals involving Series A investments, which is the first round of investor funding, in favor of later stage or growth-oriented investments, McAlpine says.  "At Momentum Cyber, we certainly expect continued growth in investment activity in cybersecurity," he says.

Related Content:

Jai Vijayan is a seasoned technology reporter with over 20 years of experience in IT trade journalism. He was most recently a Senior Editor at Computerworld, where he covered information security and data privacy issues for the publication. Over the course of his 20-year ... View Full Bio

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
AI Is Everywhere, but Don't Ignore the Basics
Howie Xu, Vice President of AI and Machine Learning at Zscaler,  9/10/2019
Fed Kaspersky Ban Made Permanent by New Rules
Dark Reading Staff 9/11/2019
Register for Dark Reading Newsletters
White Papers
Video
Cartoon Contest
Current Issue
7 Threats & Disruptive Forces Changing the Face of Cybersecurity
This Dark Reading Tech Digest gives an in-depth look at the biggest emerging threats and disruptive forces that are changing the face of cybersecurity today.
Flash Poll
The State of IT Operations and Cybersecurity Operations
The State of IT Operations and Cybersecurity Operations
Your enterprise's cyber risk may depend upon the relationship between the IT team and the security team. Heres some insight on what's working and what isn't in the data center.
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
CVE-2019-16317
PUBLISHED: 2019-09-14
In Pimcore before 5.7.1, an attacker with limited privileges can trigger execution of a .phar file via a phar:// URL in a filename parameter, because PHAR uploads are not blocked and are reachable within the phar://../../../../../../../../var/www/html/web/var/assets/ directory, a different vulnerabi...
CVE-2019-16318
PUBLISHED: 2019-09-14
In Pimcore before 5.7.1, an attacker with limited privileges can bypass file-extension restrictions via a 256-character filename, as demonstrated by the failure of automatic renaming of .php to .php.txt for long filenames, a different vulnerability than CVE-2019-10867 and CVE-2019-16317.
CVE-2019-16307
PUBLISHED: 2019-09-14
A Reflected Cross-Site Scripting (XSS) vulnerability in the webEx module in webExMeetingLogin.jsp and deleteWebExMeetingCheck.jsp in Fuji Xerox DocuShare through 7.0.0.C1.609 allows remote attackers to inject arbitrary web script or HTML via the handle parameter (webExMeetingLogin.jsp) and meetingKe...
CVE-2019-16294
PUBLISHED: 2019-09-14
SciLexer.dll in Scintilla in Notepad++ (x64) before 7.7 allows remote code execution or denial of service via Unicode characters in a crafted .ml file.
CVE-2019-16309
PUBLISHED: 2019-09-14
FlameCMS 3.3.5 has SQL injection in account/login.php via accountName.