Security Investing. PHOTO: Cybercrime Magazine.

VCs Invest Cash Piles Into The Cybersecurity Market

At least 18 startups raised $100m or more in early 2021

David Braue

Melbourne, Australia – Apr. 9, 2021

Dispelling fears of a pandemic-driven economic slowdown, venture capital firms have this year already added six new members to the cybersecurity industry’s blessing of unicorns — with the Cybersecurity Ventures VC tracker showing that no fewer than 18 cybersecurity firms raised over $100m each since January 1.

New unicorns Feedzai, Chainalysis, Orca Security, Wiz, Aqua Security, and Lacework reflected the VC community’s breathless enthusiasm for cybersecurity innovators in a monitoring and security market that was recently rated as the third-largest in the fourth quarter’s rapidly accelerating VC market.

A handful of high-valued cybersecurity firms recorded dizzying growth, with unicorn Snyk quadrupling its January 2020 valuation to $4.7b on the back of a new $300m funding round.

Fast-growing Lacework also hit unicorn status after a $525m funding round, which will among other things see the company expanding to Europe and doubling its headcount this year, driven by surging demand for its cloud security and compliance tools.

A spike in account takeover scams and banking fraud during 2020 seems to have motivated VCs to pump money into anti-fraud and digital-identity firms, with Jumio and Feedzai Inc securing $150m and $200m, respectively — pushing Feedzai into unicorn territory as it doubles down on its mission of monitoring large banks’ customer accounts for signs of fraud.

With over 300m users on Jumio’s VC-backed platform, all signs suggest that its automated identity-verification platform is resonating with big-name customers in an online environment where fraud continues to set records on a regular basis.

The breakneck pace of digital transformation, which pushed nearly every business online in some form or another, drove strong interest in identity verification across the board, with unicorn securing $100m in additional funding in late March to push its total valuation to $1.5b.

Chainalysis, whose tools help regulators and financial organizations analyze blockchains to trace illegal financial activity, doubled its overall value to $2b after raising $100m in a recent investment round — reflecting an accelerating business that CEO and co-founder Michael Gronager told CNBC, “is growing with some often traditional players embracing crypto in a way that we haven’t seen before.”

Securing the cloud pays off

Even as anti-fraud firms continue to attract VC interest, cybersecurity tools vendors are making their own waves. Tapping growing expectations of cybersecurity governance, investors pumped $180m in new funding into SecurityScorecard — whose risk-management tools monitor, classify and score companies’ cybersecurity vulnerabilities to help them prioritize their security efforts.

Similarly, infrastructure-scanning Israeli firm Wiz — a 15-month-old company that only emerged from stealth mode at the end of 2020 — secured an additional $130m in funding that, combined with a recent $100m fund-raising, pushed it into unicorn territory with a total valuation of $1.7b.

That breakneck growth rate — which founder Assaf Rappaport calling “an elegant cloud security platform that works” — reflects businesses’ hunger for tools to help simplify security monitoring in the face of ever-faster business velocity and increasingly complex information architectures spanning on-premises and multi-cloud environments.

Cybersecurity and insurance were finding common ground, with Corvus Insurance raising $100m and new unicorn Coalition securing $175m in VC funding for a security-monitoring platform that correlates risk scores with actuarial data — and enabling APIs — to predict the likelihood and severity of a potential cybersecurity attack.

Meanwhile, Israeli cybersecurity startups continued their dream run as unicorn Orca Security — which provides tools to secure companies’ increasingly pervasive cloud-based applications — also joined the blessing, attracting $210m for a $1.2b valuation that reflects recent results that exceeded projections by 50 percent.

Orca expects to grow from 20 staff in 2019 to 200 by the end of this year, reinforcing both the industry’s enthusiasm for innovative security offerings and its insatiable appetite for hard-to-find cybersecurity skills.

Israeli cloud-security firms like Aqua Security (which reached $1b valuation after a $135m funding round) and CYE (which secured $100m in additional VC funding) continued the country’s dream run, while IoT-security firm Armis almost doubled its valuation to $2b on the back of a $125m investment.

Meanwhile, threat-prevention and cloud access control firm Opswat reported 40 percent revenue growth from 2019 to 2020 — helping it raise $125m in its first external VC funding round.

That money will top up a war chest that the company will use to expand a roster of critical infrastructure operators that already includes Comcast, American Express, the U.S. Department of Homeland Security, and almost all of the country’s nuclear power facilities.

Also attracting interest from security-minded VCs was Boston-based iBoss, which secured $145m in funding as it prepares to increase headcount by 50 percent this year and targets a public listing by the end of next year.

The $100m funding rounds continued through March, with startup Axonius securing $100m to reach a $1.2b valuation and data protection firm OwnBackup raising $167.5m as it continued a five-year run of triple-digit growth — likely to continue in the near future, if the current red-hot interest from VCs continues throughout this year.

– David Braue is an award-winning technology writer based in Melbourne, Australia.

Go here to read all of David’s Cybercrime Magazine articles.