This year started in the venture capital world with a note of caution, as rumors of a recession and trade war talk with China dampened analysts’ projections of venture spending for 2019. These cautionary concerns applied to cybersecurity venture deals in particular.
One venture firm specializing in cybersecurity, Washington, DC-based Strategic Cyber Ventures, noted at the outset of 2018 that venture investing in cybersecurity companies had doubled in 2018. They pegged the total global venture spend on cybersecurity start-ups for that year at nearly $5 billion. “This rate of investment is not sustainable,” they said in their January 16, 2019 report, citing the significant dollar amount rounds, vendor fatigue, increased competition, and weary investors as the primary factors for their prediction that sooner or later venture investments in cybersecurity companies would cool.
I’ve been keeping close track of cybersecurity venture deals since I pivoted to the field, and have maintained a running tally of those venture deals that could rightly be called pure cybersecurity deals since the beginning of 2018.* Based on my analysis, 2019 is turning out to be the biggest year yet in cybersecurity venture investing. If there is a turn-down in venture capital deals, there are no signs on the horizon that it will come anytime soon. Based on a list of 346 venture capital rounds that occurred from January 1, 2018, through September 30, 2019, venture funders have put $8.529 billion in cybersecurity start-ups and companies since the beginning of 2018.**
Fully $5.4 billion of this total came during the first three-quarters of 2019, via 167 different investment rounds. Including around $525 million in deals announced since September 30, year to date venture investors have put $5.9 billion in cybersecurity companies so far in 2019, and the year isn’t over yet.
What has fueled the massive venture spending total is not the number of funding rounds, but their size. Starting the fourth quarter of 2019, the dollar amount of the funding rounds began getting bigger and stayed hefty throughout the first three-quarters of 2019. As the table above illustrates, the average funding round in Q2 2018 was $17.5 million, a figure that more than doubled in Q2 2019 to $41.2 million.
During Q2 2019, for example, SumoLogic raised $110 million in a Series G round, Auth0 raised $103 million in a Series E round, SentinelOne raised $120 million in a Series E round, KnowBe4 raised $300 million, Vectra raised $100 million in a Series E round, among some of the big-ticket investment deals during that quarter.
The same trend held true during Q3 too when OneTrust raised $200 million in a Series A round, and Cybereason raised $200 million and so forth.
All existing patrons of Metacurity and new patrons that subscribe to our top tier of patronage are welcome to access the details of the 346 venture deals we’ve included in our analysis via an online database. The database lists the cybersecurity companies, their primary focus, and each investor for each deal by date. We plan to update this database on an ongoing basis, but particularly toward the end of each quarter. For those who want two-week time-limited access to the database, we have set up a purchase option here.
*Years ago, I wrote a series of media and technology investment newsletters on cable, telecommunications, and consumer electronics analyzing a range of factors driving these sectors. In looking at the cybersecurity sector, I plan to not only continue looking at the venture capital deals but also develop other useful metrics akin to what I did for these other sectors. Metacurity has already launched a beta version of a cybersecurity stock index Stay tuned as we add more interesting and valuable features to the site.
**Although Strategic Cyber Ventures and other firms have produced a wide range of estimates on how much venture capital flowed into cybersecurity during 2018, our numbers are based solely on the publicly announced, pure-play venture rounds we could identify.