Because the inventory marketplace dropped greater than 20% in 2022 and costs upward thrust on the pump and grocery retailer, there are some markets that experience proven their talent to climate the typhoon and retain robust call for and expansion even among broader marketplace turmoil. One instance of this: the cybersecurity marketplace. Within the first part of 2022, the cybersecurity business noticed project capital investment proceed to pour into the distance, in keeping with Momentum Cyber’s Marketplace Assessment for 1H 2022.
Whilst it would possibly not have reached the record-setting ranges of 2021, project capital investment was once ceaselessly on par with the primary part of ultimate yr. Moreover, whilst IPOs have no longer re-emerged and income multiples have declined for public firms, M&A general remained robust, appearing the ongoing call for for cybersecurity as a strategic industry goal.
“Cyber threats all over the world proceed to escalate and force endured innovation and funding within the cybersecurity area. Whilst public markets is also down at the complete, companies proceed to prioritize spending on cybersecurity, making it a space that continues to supply important alternative for buyers and strategic consumers,” mentioned Dave DeWalt, Managing Director, NightDragon.
“As these days’s financial system slows down, cyber attackers are rushing up. That’s why cyber budgets stay prime and the way the cyber marketplace continues to outpace different IT sectors. The following 24 months stay a chance to put money into early level cyber startups, from each a pricing and technical innovation viewpoint,” mentioned Spencer Tall, Managing Director, AllegisCyber Capital.
Those traits are tracked via Momentum Cyber, the business’s first funding financial institution targeted completely on cybersecurity, in its Cybersecurity Marketplace Assessment for 1H 2022. Listed below are some takeaways from the document at the first part of 2022:
VC investment stays robust in cyber
Whilst public markets have bogged down significantly this yr, cybersecurity has remained moderately energetic particularly from a project capital financing viewpoint. Within the first part of 2022, there was once an implausible $12.5 billion in project capital invested throughout 531 offers. That is similar to the primary part of 2021, which noticed $12.6 billion in investment and was once via all counts a listing yr for cybersecurity funding. If truth be told, Q1 and Q2 in 2022 nonetheless ranked because the third and sixth best possible quarters of all-time for financing quantity, simplest sitting in the back of the record-setting tempo in 2021.
Essentially the most energetic sector for VC investment this part was once Possibility & Compliance, which noticed the best collection of offers via a large margin (105). Different classes that noticed important process incorporated information safety (85), id and get entry to control (54), community and infrastructure safety (44), software safety (42) and SecOps/IR/danger intelligence (40). Of the offers tracked, 37 raised greater than $100 million and 14+ had been put within the unicorn class, together with Peculiar, Past Id, JupiterOne, Subject material Safety, Nord Safety, Perimeter 81, Sonar, Teleport, and others.
Whilst the total numbers had been encouraging, Momentum Cyber did observe that deal rely did decelerate reasonably against the latter part of Q2 2022 because the marketplace endured to gradual. This would portend a long term slowdown to return, or be a lull ahead of an extra wave of investment as firms want money to proceed operations via 2022 and past.
Cyber IPOs nonetheless MIA
We proceed to enjoy the longest IPO drought in cybersecurity historical past, with out a new cyber IPOs in 2022 to this point this yr. It’s no longer for loss of cybersecurity firms of the fitting measurement and adulthood ready within the wings, however suffering markets have made it much less interesting for corporations to desert personal markets and take that subsequent step against an IPO. Nonetheless, many robust IPO applicants stay and there’s a massive pipeline of distributors who would possibly IPO in past due 2022 or early 2023.
M&A stays robust along mega offers
The primary part of 2022 noticed one of the largest acquisition offers in cybersecurity historical past, each from a financing measurement viewpoint and from their importance. The most important of the ones offers was once Broadcom’s $69.2B acquisition of VMware, which accounted for a big portion of general M&A within the part. Then again, there have been additionally seven extra offers valued at greater than $1B within the first part of 2022, together with WatchGuard ($1.5B), Barracuda ($4B), Datto ($6.2B), Sailpoint ($6.9B), Mandiant ($5.3B) and others.
Then again, even with those mega offers apart, M&A in cyber remained robust at the complete. Aside from the VMware-Broadcom deal, there was once $33.4B in M&A in cyber in 1H 2022, which is just a small tick down from the $39.4B in M&A in the similar length ultimate yr. Essentially the most energetic sectors all through the primary part incorporated controlled safety services and products, id and get entry to control, possibility and compliance, community and infrastructure safety and safety consulting.
Personal fairness passion in cyber stays prime
As we now have observed in earlier quarters, personal fairness passion in cybersecurity endured to stay robust in Q1 and Q2 of 2022. Probably the most largest offers within the quarter come with personal fairness, together with Thoma Bravo’s acquisition of SailPoint, KKR’s acquisition of Barracuda, and TA Buddies’ acquisition of Veracode. In general, there have been 56 acquisitions via personal fairness in 1H 2022.
What we’re staring at going ahead
The cybersecurity problem isn’t more likely to decelerate any time quickly, due to components corresponding to ongoing geopolitical war, heightened govt involvement, an increasing number of allotted workforces and accelerating virtual transformation. Whilst no longer unique to 2022, those components had been amplified via quite a lot of occasions, additional cementing the significance of safety within the present atmosphere. Given those traits, the desire for innovation in cybersecurity defenses is simplest growing.
Momentum Cyber calls out id and get entry to control, possibility & compliance, assault floor control, blockchain and ICS + OT as classes to observe going ahead. Moreover, the ever-increasing function of cybersecurity services and products will likely be an area to observe as controlled safety services and products keep growing as a sector and organizations all over the place search for give a boost to in devising and imposing their safety methods.
“The primary part of 2022 was once a story of 2 quarters. Strategic process within the first quarter reached an all-time prime with an overly sharp decline in the second one quarter,” mentioned Eric McAlpine, Managing Spouse at Momentum Cyber. “Acquirors and buyers have taken a a lot more wary strategy to offers lately together with a heavy favoritism to profitability – or a trail to it – over expansion in any respect prices. A paradigm shift we haven’t observed widely because the monetary disaster over a decade in the past. Nonetheless, the cybersecurity business stays very wholesome and in ‘expansion mode’ and subsequently strategic process will maximum indisputably select again up.”