Cyberattacks have been flooding media headlines lately – but have you noticed the other momentum fueled reports gaining rapid attention? Possibly, these other, more ample headlines cover record funding rounds by companies aiming to protect against all of these cyberattacks.
Startups in general have experienced a remarkable explosion in funding this year but cybersecurity seems to lead its own wave of success. In fact, at the halfway point of 2021, security companies have surpassed the record breaking $7.8 billion that was raised last year!
Data shows that roughly $9 billion across 309 deals came in during the first six months of the year. That is more than double the $4.4 billion the industry realized in the first half of 2020. Q2 2021 alone captured $5.2 billion compared to less than $2 billion for the same quarter last year. The Q2 frenzy came after the sector captured $3.8 billion in Q1.
“Valuations are absolutely crazy and the multiples are just insane right now,” states Michael Rash, CEO at MCDA CCG, Inc.
Israel-based, passwordless authentication company Transmit Security raised a $543 million Series A at a $2.3 billion pre-money valuation in June; San Jose, California-based cloud security company Lacework closed a $525 million round at a valuation of more than $1 billion in January; and France-based digital asset security provider Ledger raised a $380 million Series C in June.
But Why?
Without a doubt, colossal ransomware incidents seen on Colonial Pipeline and SolarWinds have attributed to the massive increase in dollars raised within cybersecurity. These two incidents in particular gained notable recognition from countless publications; then, right as the first half of the year was closing, Kaseya, a leading provider of IT security and management solutions -was the target of a massive ransomware attack.
“So many hacks are happening recently, it seems like you are seeing it every single week,” Michael Rash states.
The particular attacks above quantify just one contributing driving factor. Another contributing factor traces to the beginning of the Covid-19 pandemic in 2020, where it forced companies to accelerate and implement digital transformation. These transformations created a natural increase in company-related reliance on technology, doing what was needed to survive and to succeed- all at the expense of increased cybersecurity spending. Responsible business owners have been more vigilant when it comes to their network and IT infrastructures.
Future Areas Of Interest
Cloud security-which has already seen huge rounds this year- along with API security and contextual authentication, will be other areas of interest that will likely secure huge rounds in this half of the year.
Currently in development, Crypto, DevOps, and Quantum computing are new generational companies who will likely grow post Covid-19 pandemic.
In addition to cloud security, subsectors such as identity and access management as well as risk and compliance all performed well in the first half of the year, and there’s little reason to believe that will change.
Sustainability
While there is no doubt some of those areas of cybersecurity will continue to see increased interest, the question remains whether this level of venture capital interest is sustainable for the long run.
Here at MCDA CCG we see some issues with investment interest within the current landscape. The current landscape shows many solutions being funded, however, these solutions are only solving a very specific and tiny portion of security or a very niche problem. We are also witnessing overall investment philosophies, where investors who used to moderately invest while a company matured, these same firms are now offering huge sums of money to several companies in very early stages all in the hopes that one of those becomes the next CrowdStrike.
$15 billion in cybersecurity investment this year is pretty much inevitable and it’s not out of reach to see $20 billion if this crazy frenzy continues these last few months of 2021. We can’t accurately predict when this current run will end but we do believe that this is just not sustainable.
If you’re looking to claim your seat and take part of this history in the making, we strongly advise that you approach it sensibly and in the association of strong contacts. Here at MCDA CCG,-headquartered in Placentia, Orange County, California- we provide just that – a helping hand to set you up in cybersecurity investing.
Or, if you’re a cybersecurity firm looking for working investment, we can help you too. Years of industry related experience and relationships reinforces our position to increase your abilities in getting funding.
Don’t wait for this current run to end and miss out, contact us for a no-obligation call today!