US companies dominate global cybersecurity investment

US cybersecurity companies have already raised over $1bn this year

  • Global cybersecurity investment reached $1.4bn across 89 deals in the first quarter of 2019. The classification of cybersecurity in this Market Research refers to cybersecurity companies which offer solutions that are applicable in the financial services sector. More than $1bn of this, equivalent to almost 75% of total investment, was raised by companies headquartered in the US.
  • US cybersecurity companies have attracted the lion’s share of investment every year since 2014, with an average share of 80.5% during that period. Last year, however, this share was significantly smaller at 57.4%, its lowest since 2014.
  • The drop is due to a big increase in capital raised by Asia-based cybersecurity companies. After a combined total investment of less than $200m from 2014 to 2017, the capital raised by companies in Asia surged to $2.3bn last year. This growth can be attributed to the capital raised by Hong Kong-based AI company SenseTime. The software company, which focuses on computer vision and deep learning, offers various solutions for the financial services sector including face and text recognition products for mobile payments. SenseTime raised $2.2bn in three transactions last year. Earlier this year in April, the company entered into a contract with Malaysia-based AI company G3 Global Berhad and engineering contractor China Harbour Engineering to build the first AI park in Malaysia with an expected cost of $1bn.

Global cybersecurity investment in US companies has reached over $1bn in each of the last four quarters

  • The second and third quarter of 2018 raised $5.4bn across 189 deals, this accounted for 71.6% of the total value invested last year.
  • US cybersecurity companies attracted more than half of the capital raised in these two quarters. Excluding the three previously mentioned SenseTime transactions, all of the top 15 deals in 2018 were raised by US-based startups.
  • Although investment in the first quarter of 2019 was noticeably smaller than the two previously mentioned strongest quarters of last year, there was 74.1% more capital raised in Q1 compared with the corresponding quarter in 2018.
  • Deal activity in Q1 2019 was 22.1% lower than the first quarter of last year. The average deal size however has almost doubled from $9.4m in Q1 2018 to $18.0m last quarter.

Six of the top ten cybersecurity deals in Q1 were completed by US companies

  • More than $700m was raised by the top 10 cybersecurity transactions in the first three months of the year, which accounts for 50.5% of the total value invested so far. This is relatively small percentage of total investment, the equivalent figure for the WealthTech and Payments and Remittances sectors is 67.0% and 91.1% respectively. This low figure is a testament to the thriving cybersecurity landscape and shows the high aggregate level of investment raised by numerous smaller deals. Six of these top cybersecurity funding rounds were raised by US companies, with five of these companies headquartered in Silicon Valley.
  • The largest deal so far this year was Rubrik’s $261m Series E round. This transaction, which was valued at almost $200m more than the next largest round, was led by Bain Capital Ventures. The latest round valued the Palo Alto-based cloud data management company at $3.3bn. It has earmarked the latest capital injection for the development of its security and compliance services.
  • The largest deal raised by a company based outside the US was Shift Technology’s $60m Series C funding round. The Paris-based startup provides insurance companies with a SaaS solution to improve and scale fraud detection and claims handling. Shift plans to use its latest funding for hiring more people in its Boston office.

Asia has seen the biggest increase in cybersecurity investment over the last five years

  • Companies in Asia, Europe and Middle East & Israel all attracted over 3.0x more investment last year than in 2014. Asia saw the most dramatic increase, with total amount invested increasing more than 180x, from a base of 12.5m in 2014. This dramatic growth is due to the previously mentioned SenseTime transactions.
  • The Middle East & Israel saw five times more investment in 2018 than four years previously. The increase in investment in this region is due to Israel-based companies completing more and much larger funding rounds in the last five years. In 2014 Israel-headquartered companies raised no funding rounds valued at more than $11m. Last year saw eight transactions completed in this bracket.
  • Companies in Europe have also raised significantly more capital across the last four years. In fact companies based in France, Netherlands, Sweden, Switzerland and United Kingdom all completed funding rounds valued at $10m or over last year.

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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