Investors Put $4.6 Billion Into Cybersecurity Startups In The Last Two Years

15/07/2015 12:27

Q2'15 was strong for cybersecurity funding, with $704M invested across 47 deals. It was the highest quarterly funding total since Q2'14.

Cybersecurity is increasingly a hot sector for investment, especially as more valuable information goes digital, and corporations continue to suffer high-profile data breaches. We used CB Insights data to take a look at the overarching financing trends in cybersecurity, as well as top investors and companies.

Cybersecurity Deals and Dollars

Over the last 5 years, deals and dollars to cybersecurity startups have been growing steadily. In 2014, cybersecurity startups took in $2.5B dollars in funding across 224 investments, up from less than $1B across 108 deals in 2010. In Q1’15 and Q2’15, deal flow has slowed down a bit, with 99 deals in the two quarters compared to 240 for all of 2014. Funding is roughly on pace to equal the amount in 2014, with $1.2B in cybersecurity financing in the first half of 2015.

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In the last eight quarters, including Q2’15, investors have plowed $4.6 billion into cybersecurity.

The strongest quarters for investment so far have been Q2’14, Q3’14, and Q2’15. Notable deals during those periods include a $90M growth equity round from Andreeseen Horowitz raised by Emeryville, California-based Tanium in Q2’14, and a $150M Series F round raised by Lookout in Q3’14 (at a $1B valuation), with investors including Khosla Ventures, Morgan Stanley, Goldman Sachs, and Andreessen Horowitz. In Q2’15 Accel Partners led a $100M Series C round that valued Illumio at $1B.

Deal flow has trended down for four quarters in a row, but Q2’15 was strong for funding with $704M invested across 47 deals.

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Cybersecurity Deals And Dollars By Round

The breakdown of number of deals by investment stage has remained relatively steady over the few years. Early-stage deals (Series A and Seed/Angel) have accounted for around 55% of the deal flow since 2011. Mid-stage deals (Series B and C) have accounted for around 32% of deals in 2015, slightly up from ~20% in 2011, 2012, 2013, and 2014. Late-stage deals (Series D and E+) were a smaller percentage of deals in 2015 so far than in previous year, at only 7%. Late-stage deal share had been steadily declining, dropping to 10% in 2014 from 17% in 2011.

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Early-stage dollar share has been pretty variable, fluctuating from 14% in 2010 to 33% in 2013. However, mid-stage funding occupied an uncharacteristically large share of funding dollars in 2015 year-to-date, at 58%. Late-stage funding was weak in the first two quarters of 2015, at only 20%.

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Most Active Investors

The most active cybersecurity investor the last 5 years has been Intel Capital. Intel was followed by Kleiner Perkins and Andreessen Horowitz. All of the top 6 investors had investments in 10 or more cybersecurity startups. Notable companies in the portfolios of the top 10 investor firms include Tanium, Good Technology, and Lookout. Only 2 of the 10 most active investors in cybersecurity were corporate venture funds: Google Ventures and Intel Capital (the latter was the top investor).

Most Active Cybersecurity Investors: 2010-Q2’15
Rank Investor
1 Intel Capital
2 Kleiner Perkins Caufield & Byers
2 Andreessen Horowitz
2 Accel Partners
3 Bessemer Venture Partners
4 Google Ventures
5 Norwest Venture Partners
5 New Enterprise Associates
5 Sequoia Capital
5 Lightspeed Venture Partners

While Intel Capital was the most active investor overall in cybersecurity, it did not even make the top 10 list for most active early-stage investors. However, most of the top 10 early-stage investors were also on the top 10 overall investor list, including Andreessen Horowitz, Google Ventures, and Accel Partners. Each of them had 10 or more early-stage investments in cybersecurity. All of Google Ventures’ cybersecurity investments were at the early stage.

Most Active Early Cybersecurity Investors: 2010-Q2’15
Rank Investor
1 Andreessen Horowitz
2 Google Ventures
2 Accel Partners
3 Kleiner Perkins Caufield & Byers
4 SV Angel
4 Norwest Venture Partners
4 Bessemer Venture Partners
5 Founder Collective
5 Data Collective
6 New Enterprise Associates

Most Well-Funded Startups

The most well-funded cybersecurity startup was Good Technology, a Sunnyvale, California-based provider of secure enterprise software, which has raised more than a half-billion dollars in venture funding. Next came Lookout, a smartphone-security company with almost $300M in funding from investors including Khosla Ventures, Accel Partners, and Index Ventures. Rounding out the top 3 was OpenPeak, a Florida-based provider of enterprise mobile device management software, which has raised more than $200M in funding from investors including RRE Ventures, AT&T, and Blackstone.

Most Well-Funded Cybersecurity Startups: 2010 – Q2’15
Rank Company
1 Good Technology (Visto)
2 Lookout
3 OpenPeak
4 Good Technology
5 Tanium
6 Okta
7 Illumio
9 Ping Identity
10 Bit9