While cybersecurity couldn’t quite match last quarter’s record-setting fundraising total, it showed almost no signs of slowing down.
Now, the only real question that remains is: Will total funding for the year hit $20 billion?
Last quarter saw approximately $5.3 billion pour into the different areas of cyber. While the third quarter closed at just under $5 billion, that still ranks as the second-biggest funding quarter the sector has ever seen—and well ahead of the $1.5 billion seen in the same quarter last year.
According to Crunchbase numbers, just more than $14 billion now has been invested in cybersecurity year to date— far outpacing the then record-breaking $7.8 billion raised by security companies last year.
Although this quarter’s total funding was the second highest on record, it is interesting to note deal flow seemed to greatly slow. The 123 funding deals announced in the quarter is the lowest amount of deals closed in seven years in a quarter. However, what this quarter lacked in quantity it seemed to make up for in quality as valuations continue to be off the chart for cybersecurity companies.
Seven raises this quarter were more than $200 million and 18 rounds totaled more than $100,000. The largest rounds of the quarter included:
- Boston-based application security developer Snyk closed a $530 million Series F early last month at a valuation of $8.5 billion. The round was co-led by Sands Capital and Tiger Global;
- In July, New York-based blockchain cyber firm Fireblocks, a security-focused platform for digital assets, raised $310 million in a Series D funding. The round was co-led by Sequoia Capital, Stripes, Spark Capital, Coatue, DRW Venture Capital and SCB 10X. The financing brought its valuation to above $2 billion; and
- Santa Clara, California-based secure access service edge security company Netskope closed a $300 million investment round led by existing investor ICONIQ Growth—lifting its valuation to $7.5 billion.The continuing surge in capital investment in cybersecurity comes as the industry continues to be in the news due to an onslaught of hacks and ransomware attacks. President Joe Biden announced last week—helping to kickoff October as “Cybersecurity Awareness Month”—the White House was looking to bring together 30 other countries to fight against the increasing amount of ransomware attacks and other cybercrime.
Cybersecurity was further highlighted in a much more human way last week by a report that a ransomware attack may have led to a baby’s death in 2019, when an Alabama hospital’s computer systems were affected by an attack and unable to detect an issue during childbirth.
Health care IT security is one of the areas that many venture capitalists have pointed to as a new emerging area of cybersecurity.
However, that may be one of the most amazing aspects of the run of investment cybersecurity is seeing—it is not one new, growing subsector of the space or one particular type of solution that is leading the growth, but rather dozens of new emerging areas as companies and consumers look to secure everything from finances to APIs.
Just a quick glance of the top five rounds shows the diversity in investors’ interest, ranging from risk management and cloud security solutions to software development and the expanding area of cryptosecurity.
Expanding that view to the top 10 rounds of the quarter adds companies from the increasingly popular cyber insurance sector, such as San Francisco-based At-Bay and Coalition, as well as identity platforms like San Francisco’s Persona.
Perhaps the only thing that can match the diversity of security solutions is the variety of investors. According to Crunchbase data, over 340 different investment firms invested in the sector in the third quarter. No firm made more than five investments—which was Accel—and only three other firms made four deals in the space—Tiger Global, Salesforce Ventures and Insight Partners—in the third quarter.
Where this is likely to stop is impossible to say, but with this year’s fourth quarter practically a lock to surpass the $2.8 billion in investment the space saw last year, a $20 billion year in cybersecurity seems like a real possibility as companies, the government and consumers look to stay safe while staying connected.