VCs Now Cold On Cybersecurity Startup Investments

Not all that long ago, cybersecurity investment was on fire. Now, it’s gathering cold moss, at least in terms of funding. As Reuters reported on Tuesday (Feb. 23), the industry itself is in the midst of an investment pullback as venture capitalists shy away.

There’s no dearth of offerings though, given the hundreds of startups and myriad of technologies that span firewalls, government security and many other avenues. And there’s no dearth of need for the technologies, given the endless stream of hacks and scams. In private investment activity, $3.3 billion came into 229 cybersecurity deals in 2015, according to CB Insights. The funding is now being allocated to only the more stable and mature companies that have proven business models.

In an interview with Reuters, Promod Haque, senior managing partner at Norwest Venture Partners, with $6 billion in funds managed, said: “Investors are looking at balance sheets and saying, ‘You raised $100 million, and you have nothing to show for it?’”

Other investors said that funding rounds were not getting closed. In other cases, it is taking as much as eight months to close deals, which is double the length of time than a few years ago, sources told the wire. Reuters said that one cyber startup founder said that, two years ago, he looked to get more funding and then walked away from his efforts. And other executives said that they were looking for buyers, with one dealmaker stating that inquiries for firms looking to get sold are up 40 percent from this same time a year ago. Merger and acquisition activity was up last year, having doubled to $27 billion from the previous year, which comes from EY data. The number of deals was up roughly the same amount.