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Venture funding overall was still sluggish, but cybersecurity startups saw some love from investors in the first quarter of 2024.

To be sure, this is not the salad days of 2021 — cybersecurity funding was still down year to year — but the sector saw its best funding quarter in three quarters.

All told, cybersecurity startups raised nearly $2.7 billion in 154 deals in Q1, per SA¹ú¼Ê´«Ã½ .

That dollar figure is the highest since Q1 last year, when similar startups raised just less than $2.9 billion in 228 deals. However, the Q1 2024 dollar figure represents a 69% increase from the previous quarter, when cyber startups raised just $1.6 billion in 148 deals.

The numbers seem to show quite a rebound for a sector that in the last quarter of 2023 saw its lowest amount of funding since Q3 2018, when cyber firms raised just $1.3 billion.

Big cyber deals rebound

One of the big differences between Q1 and the previous quarter was the comeback of big rounds in the cybersecurity realm — something that seems to be happening more often again in a lot of sectors.

While no round topped $140 million in Q4 2023, three big rounds were greater than that amount in Q1:

• Broomfield, Colorado-based locked up a $300 million fundraise at a pre-money valuation of $5 billion led by in January. The startup was spun out of in 2021 and merged with ;
• In February, Austin, Texas-based , which provides endpoint management, security and monitoring, raised a $231.5 million Series C led by at a $1.9 billion valuation; and
• Finally in March, New York-based , a cybersecurity and SaaS asset management startup, secured a $200 million Series E extension led by and . The company had originally raised another $200 million in the Series E in 2022 at an announced $2.6 billion valuation.

In fact, big rounds were somewhat the story of the quarter, which saw nine cybersecurity startup funding rounds of $100 million or more. That’s three times as many as there were in Q4 2023.

Not just AI

The easy thing to do is write off the jump in cyber funding solely to AI — after all, many cyber startups trumpet the use of the technology in their platform for automation or help provide guardrails for companies using it.

But a look at some of the firms that raised big in the quarter seems to tell a different story.

Two of the bigger raises in Q1 were locking up a $100 million Series E from investors including and , and New York-based securing $100 million in strategic debt/credit financing led by .

The companies both offer industrial security — also called operational technology security — and IoT security platforms, a subsector of cybersecurity that had seen a dearth of funding in recent quarters.

Another big round went to New York-based , a cybersecurity platform purpose-built for small and medium-sized enterprises. The company announced a $100 million Series D led by last month to serve what many believe is an underserved market.

That is not to say many of these companies don’t have an AI story to tell — especially to investors — but that is not the entirety of their businesses.

Better days ahead?

All of that said, this does not mean cybersecurity is headed back to the heights of 2021, when the sector raked in nearly $24 billion — an amount that seems ludicrous today.

It does mean VCs and strategics continue to see value in investing in the industry even as IT budgets are cut and competition continues to increase.

Already this month, data security startup raised a $300 million Series C led by at a $1.4 billion valuation, so the second quarter is off and running.

Most cybersecurity executives will proudly proclaim the resilience of their security offering to any malicious attack — it seems their startups may have a little of that virtue when it comes to securing funding in a tough market.

Methodology

Cybersecurity is defined by the industries of network security, cloud security and cybersecurity, according to SA¹ú¼Ê´«Ã½ 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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 Related reading:

• Cybersecurity Startup Funding Hits 5-Year Low, Drops 50% From 2022
• Cyera Nabs $100M To Protect Data
• Nozomi Networks Raises $100M As Investors Eye Industrial Cybersecurity Once Again
• Data Security Startup Cyera Locks Up $300M At $1.4B Valuation

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