SA国际传媒

Funding to venture-backed cybersecurity firms in the second quarter remained high, but there are signs that it is vulnerable to the VC slowdown.

Global funding for the second quarter was less than $4 billion, the first time the number dipped that low since the fourth quarter of 2020 when it hit $2.82 billion, .

鈥淚t’s not hard to anticipate we would see some sort of a slowdown,鈥� said , managing director at who invests in cybersecurity.

Deal flow also seemed to slow, with only 170 deals announced in the just-finished quarter, the lowest number since the third quarter last year, according to SA国际传媒.

However, while a decline is noticeable it also is much too early to say the sky is falling. The first half of this year basically matched the first half of last year in terms of funding鈥�$9.8 billion to $9.9 billion鈥攁nd several companies were able to raise huge tranches of cash in the second quarter alone. Some of those biggest deals include:

• Switzerland-based , which helps manage code quality, raised a $412 million round in April.
• In May, San Francisco-based AI-based email security platform raised a $210 million Series C that values the company at $4 billion.
• Hoboken, New Jersey-based enterprise identity startup raised a $200 million Series C in May.

There also have been more than a dozen unicorns minted in the space in the first half of the year, including , and , .

Slight slowdown

Nevertheless, it does seem to indicate a slight pullback from last year鈥檚 all-time high for funding, when more than $20 billion was poured into the space.

Ward said the slowdown, however, is not just coming from the investment side, but also the startup side as founders are taking a step back and reevaluating raising funding in the current market.

He also said he is having more 鈥渆xploratory conversations鈥� with founders, going over different options on how to best move a company forward and if that should include fundraising or not.

, founding director of San Francisco-based financial advisory firm , said it is always important to take a wider-angle view of the investment environment. Venture firms are still raising good-sized funds鈥攕uch as 鈥� recent $400 million security seed fund鈥攁nd capital is still flowing into the security sector.

鈥淭his leaves me optimistic that there will not be as significant of a slowdown in the security sector, and also milder headwinds for earlier-stage companies,鈥� Boukouris said.

鈥淔or seed-stage companies, I expect the impact to be even milder, as the more space there is between a company and the public markets, the less we’d expect them to be impacted by public market turmoil,鈥� he added.

The future

Others also remain bullish on cybersecurity investing鈥攚ith many calling the sector 鈥渞esilient鈥� as its importance only seems to grow. The increase in ransomware attacks, hacks and world events like the Ukraine/Russia conflict have only shone a brighter鈥攁nd much hotter鈥攕potlight on the sector, investors say.

Ward said he also expects to see strong investment around remediation technologies, especially as it applies to both DevOps and cloud security.

While funding may not be at 2021鈥檚 all-time high levels, Ward added, it is still strong when compared to other years and certainly where the sector was even just a decade ago.

鈥淲ith the technology we have now, I鈥檓 just as bullish on innovation as I was three to four months ago,鈥� he said.

Methodology

Cybersecurity is defined by the industries of network security, cloud security and cybersecurity, according to SA国际传媒 data. Most announced rounds are represented in the database; however, there could be a small time lag for rounds reported late in the quarter.

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