Lack of big deals in the first half of 2019 sets global Cybersecurity funding to decline this year

There have been no funding rounds valued over $500m so far this year

  • Just two of the top 10 transactions raised by cybersecurity companies in financial services in the last five years were completed in 2019 and these constitute 13.1% of the total capital raised by these funding rounds.
  • The biggest deal so far this year was Kaseya’s $500m private equity round in May. The company provides IT infrastructure management solutions. The CEO Fred Voccola said that the latest capital injection will be used to push sales to MSPs, which are deploying the software for the rapidly increasing demand of SMEs.
  • The second largest deal was a $261m Series E round raised by Rubrik in the first half of the year. The Palo Alto-headquartered company, which offers a cloud data management platform, has been selected by both Coventry University and the University of Reading to protect their digital environments.
  • The top 10 transactions have collectively raised $5.8bn since 2014, making up 20.4% of the total value invested in the time period. Seven of these deals were completed by companies based in North America and the remaining three funding rounds were raised last year by Hong Kong-based company SenseTime.

 

Capital raised in smaller funding rounds, valued under $75m, has exceeded $2bn every year since 2014

  • The total amount invested in cybersecurity companies globally reached $3.1bn across 169 deals in the first half of the year, just surpassing 40% of 2018’s annual level. Smaller transactions, valued under $75m, made up 63.3% of the capital raised in H1, showcasing the diverse range of smaller companies thriving in the sector. In fact, funding rounds in this bracket have collectively raised more than $2bn every year between 2014 and 2018, increasing from $2.2bn to over $3.0bn during that period.
  • Global cybersecurity investment set a new record in 2018, with almost $6.9bn invested across 404 deals. This was due to a surge in larger deals, valued at $75m and over, which collectively raised $3.8bn.
  • More than half of this capital invested was made up of three massive transactions, each valued at over $500m, completed by Hong Kong-based company SenseTime. The software company, which specialises in AI-powered recognition technologies, raised $2.2bn last year. Its offering includes face and text authentication services for fraud prevention. Since inception in 2014 it has reached a valuation of $4.5bn, and currently has over 700 clients and partners including Honda and Qualcomm.

 

Cybersecurity companies offering Threat Management/Security Operations and Identity & Access Management solutions are the most backed by investors

  • More than one in five companies to close at least one funding round since 2014 offer solutions for Threat Management/Security Operations.
  • The largest transaction competed by a company offering this solution was FireEye’s $739.3m post-IPO equity in 2014. The company’s platform, FireEye Adaptive Defense, enables financial institutions to detect and defend against exploits and advanced attacks that bypass their traditional security measures. FireEye has acquired seven companies since 2014. In May this year the company acquired cybersecurity Risk Assessment and Management platform, Verodin for $250m.
  • The second most popular offering from cybersecurity companies in financial services is Identity & Access Management, with solutions from 168 companies. Additionally, as Identity & Access Management solutions often have an application in Fraud Prevention, it is unsurprising that there are 94 cybersecurity companies offering solutions for both of these categories. This figure can only be expected to grow further as online banking and mobile payments become increasingly popular among both current consumers of financial services and the unbanked population. The three largest funding rounds in this subsector were the previously mentioned SenseTime transactions last year.
  • Another large subsector was Cloud Security with 80 companies offering these solutions. An increasingly large number of firms are moving their virtual workloads into the cloud and it is reported that organizations who use the cloud are three times more likely to experience a data breach than those who do not.

 

Cybersecurity exits increased 15x between 2014 and 2018

  • Exits in the cybersecurity space, including acquisitions and IPOs, have increased by a whopping 15x from 2014 to 2018. However, in the first half 2019, there was a slowdown in exit momentum, with only 17 deals being completed, compared with the 23 in H1 2018.
  • Tufin, a global leader in Enterprise Network Security Policy Orchestration, has been the only IPO in the first half of 2019, raising $108m at a valuation of $453.6m.
  • From 2014 to 2018, there has been a YoY growth in the number of exits, with a compound annual growth rate of 96.8%. This is testament to the growing importance among FIs and enterprises of installing adequate cybersecurity. A rise in cybercrime and cyber-attacks have increased the need for the integration of tighter cybersecurity controls.
  • An example of this is California-based software company Cylance, which utilizes AI to prevent computer viruses and malware. Cylance was acquired by multinational tech conglomerate Blackberry for $1.4bn  in November 2018.

 

The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2019 FinTech Global

 

 

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