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2014-15 Cybersecurity
Venture and M&A
What are the Trends?
Nick Normile
August 2015
Which subsectors are getting funded?
These 16 stand out:
Subsector Purpose
Anomaly Detection
Detects anomalous activity on...
Subsector Purpose
Incident Management
Companies that manage the
necessary workflow post-incident
(PagerDuty, Co3 Systems)....
Where did the Money Go?
2014
$2.1 Billion in cybersecurity funding across 231 rounds
$0
$50
$100
$150
$200
$250
$300
$350
...
Anomaly
Detection
2%
Cloud Security
10%
Code Security
Analysis
1%
Data Security
8%
Endpoint
Protection
6%
Fraud
detection
...
Where did the Money Go?
2015
$1.87 Billion in cybersecurity funding across 164 rounds thus far (8/12)
$0
$50
$100
$150
$20...
Anomaly
Detection
6%
Bug Bounty
1%
Cloud
Security
7%
Code Security
Analysis
1%
Data Security
9%
Endpoint
Protection
7%
Fra...
Compare 2015 to this time 2014*
We’ve seen an 11% increase in # of rounds over this time last year
(164 vs. 147), but a mo...
Where is the increase coming from?
Not from the distribution of round type —
that has stayed relatively constant.
Pre Seri...
Not from the distribution of funding by round type — late stage funding as a
share of total funding decreased by 10% in 20...
It is coming from the across-the-board increase
in amount of funding provided in each round.
This largely holds for both t...
What About the Exits?
IAM companies represented ¼ of the 60 cybersecurity exits in 2014.
There have been just 23 exits in ...
Key Takeaways
S Endpoint protection companies continue to receive an
outsized portion of funding relative to the # of comp...
Thanks for Reading!
S I’m a college student at the University of Pennsylvania
going into my senior year. I’m passionate ab...
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2014-15 Cybersecurity Venture Funding and M&A

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An overview of the subsectors and industry trends

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2014-15 Cybersecurity Venture Funding and M&A

  1. 1. S 2014-15 Cybersecurity Venture and M&A What are the Trends? Nick Normile August 2015
  2. 2. Which subsectors are getting funded? These 16 stand out: Subsector Purpose Anomaly Detection Detects anomalous activity on the network. Usually used for Insider threats (DarkTrace, RedOwl) Bug Bounty Platform for hosting bug bounties (HackerOne, Synack). Cloud Security Protects corporate data / applications in the cloud (Adallom, HyTrust). Code Security Analysis Scans source code for vulnerabilities (Checkmarx, BugCrowd). Data Security Traditional DLP and companies that protect data (enSilo, Ionic). Endpoint Protection Traditional and next-gen antivirus and related tools (CrowdStrike, Tanium). Fraud detection Detection / mitigation of transaction fraud (Pindrop Security, fraudmetrix) Identity & Access Mgmt Identity verification and permissions management solutions (Thycotic, Duo). I used data from CB Insights, Mattermark, and CrunchBase. I scrubbed the data, and categorized each company by subsector.
  3. 3. Subsector Purpose Incident Management Companies that manage the necessary workflow post-incident (PagerDuty, Co3 Systems). Mobile Security Mobile device management and other companies focused on securing mobile phones (Hypori, Mocana). Network Security Traditional intrusion prevention, network monitoring and related solutions (Tenable, AirTight). Secure Communications Solutions for secure email, text and other forms of communication (Silent Circle, Rubicon Labs). Security Ratings Companies that provide ratings on companies’ security status (Bitsight, Security Scorecard). Security Training Anti-phishing and related training for corporate employees (PhishMe, Wombat) Threat Intelligence Solutions that monitor external and internal networks for potential threats (Cyphort, iSight). Web Security Secure web gateways and related products (Zscaler, Menlo Security) Which subsectors are getting funded (cont)?
  4. 4. Where did the Money Go? 2014 $2.1 Billion in cybersecurity funding across 231 rounds $0 $50 $100 $150 $200 $250 $300 $350 0 5 10 15 20 25 30 35 40 45 50 # of Rounds Funding
  5. 5. Anomaly Detection 2% Cloud Security 10% Code Security Analysis 1% Data Security 8% Endpoint Protection 6% Fraud detection 10% IAM 16% Incident Management 4% Mobile Security 6% Network Security 19% Secure Communi- cations 4% Threat Intelligence 7% Web Security 5% Companies Funded Anomaly Detection 2% Cloud Security 14% Code Security Analysis 2% Data Security 5% Endpoint Protection 12% Fraud detection 5% IAM 15% Incident Management 3% Mobile Security 12% Network Security 14% Secure Communi- cations 3% Threat Intelligence 7% Web Security 5% Funding Received 2014 Endpoint protection companies received 12% of funding despite representing just 6% of funded companies
  6. 6. Where did the Money Go? 2015 $1.87 Billion in cybersecurity funding across 164 rounds thus far (8/12) $0 $50 $100 $150 $200 $250 $300 $350 0 5 10 15 20 25 30 # of Rounds Funding
  7. 7. Anomaly Detection 6% Bug Bounty 1% Cloud Security 7% Code Security Analysis 1% Data Security 9% Endpoint Protection 7% Fraud detection 10% IAM 15% Mobile Security 8% Network Security 13% Secure Communi- cations 4% Security Ratings 1% Security Training 1% Threat Intelligence 7% Web Security 9% Companies Funded Anomaly Detection 5% Bug Bounty 3% Cloud Security 12% Code Security Analysis 5% Data Security 8% Endpoint Protection 16%Fraud detection 6% IAM 9% Mobile Security 5% Network Security 7% Secure Communi- cations 4% Security Ratings 2% Security Training 1% Threat Intelligence 8% Web Security 10% Funding Received Endpoint protection companies continue to get the big checks: EPP companies received 16% of funding despite representing just 8% of funded companies 2015
  8. 8. Compare 2015 to this time 2014* We’ve seen an 11% increase in # of rounds over this time last year (164 vs. 147), but a more than 36% increase in funding ($1.87B vs. $1.37B) *The period 1/1/14 through 8/12/14 0 5 10 15 20 25 30 35 # of Funding Rounds 2014 2015 $0 $50 $100 $150 $200 $250 $300 $350 Total Funding 2014 2015
  9. 9. Where is the increase coming from? Not from the distribution of round type — that has stayed relatively constant. Pre Series A 27% Series A 32% Series B 13% Series C 8% Late 12% Debt 8% 2014 # of Rounds (through 8/12) Pre Series A 26% Series A 27% Series B 16% Series C 12% Late 9% Debt 10% 2015 # of Rounds
  10. 10. Not from the distribution of funding by round type — late stage funding as a share of total funding decreased by 10% in 2015 (although the share of funding coming from late + Series C rounds stayed constant at around 50%). Pre Series A 3% Series A 18% Series B 26% Series C 28% Late 22% Debt 3% 2015 Funding Pre Series A 3% Series A 22% Series B 24% Series C 17% Late 32% Debt 2% 2014 Funding (through 8/12)
  11. 11. It is coming from the across-the-board increase in amount of funding provided in each round. This largely holds for both the mean and median. 0.9 6.4 17.5 19.4 25.8 2.3 1.3 7.4 17.7 27.7 27.6 3.8 $0 $5 $10 $15 $20 $25 $30 Pre Series A Series A Series B Series C Late Debt Mean Round Size 2014 2015 0.5 6.0 12.0 19.0 16.5 0.51.0 6.9 17.0 24.5 13.4 2.3 $0 $5 $10 $15 $20 $25 $30 Pre Series A Series A Series B Series C Late Debt Median Round Size 2014 2015
  12. 12. What About the Exits? IAM companies represented ¼ of the 60 cybersecurity exits in 2014. There have been just 23 exits in 2015 (as of 8/12). There were 40 by this time last year. Cloud Security, 6, 10% Data Security, 3, 5% Endpoint Protection, 3, 5% Fraud detection, 7, 12% IAM, 15, 25% Mobile Security, 10, 17% Network Security, 8, 13% Secure Communicatio ns, 3, 5% Threat Intelligence, 2, 3% Web Security, 3, 5% 2014 Anomaly Detection, 1, 4% Cloud Security, 4, 17% Code Security Analysis, 1, 4% Data Security, 2, 9% Fraud detection, 2, 9% IAM, 3, 13% Mobile Security, 2, 9% Network Security, 3, 13% Unified Threat Management*, 3, 13% Threat Intelligence, 1, 4% Web Security, 1, 4% 2015 *Unified Threat Management refers to Websense, Fidelis and Blue Coat
  13. 13. Key Takeaways S Endpoint protection companies continue to receive an outsized portion of funding relative to the # of companies funded (think Tanium, Cylance, Crowdstrike). S Round sizes are increasing — especially in Series C rounds (think Crowdstrike and Illumio). Is the Series C the new pre-IPO round? S Cybersecurity M&A (in # of deals) is way down. Are high valuations scaring strategic buyers away? I’m wary about drawing conclusions from less than two full years of data, but…
  14. 14. Thanks for Reading! S I’m a college student at the University of Pennsylvania going into my senior year. I’m passionate about tech and tech investing. You can sign up for my cybersecurity newsletter here, and read past issues here. S Email me with any questions or feedback! normile@wharton.upenn.edu

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