Well here we are now in Chi Town, in the thick of winter. We must have had at least 12+ inches of snow in the last week, and on top of that, we are in the middle of another, but much smaller Polar Vortex for the next week or so.
Although still freezing, it is nothing like what we had about 3 years at about this time when the wind chills got to below -80 degrees Fahrenheit. Apart from that, nothing too much else new happening so far, the start of this year, even on the Cybersecurity front.
There are the usual security breaches, but nothing quite yet to the magnitude of that of the Solar Winds incident. But, throughout last year, there is something I did want to write about. It deals more with the M and A and startup activity in the Cybersecurity world.
Despite the economic downturn that the United States went through last year because of COVID19, the economic activity our world was actually vibrant.
There were companies that bought out other companies, and good deal of start ups receiving a large amount of VC funding. Heck, they were even startups coming out with new products and services, especially that in the fields of AI and ML. So, where does all of this stand right now, as we are now almost 50% into the way of Q1? Let’s take a snapshot view:
*The buying and selling of products/services:
According to a study from Data Tribe, last year, the overall US economy saw substantial drops in terms of VC Funding. For example, there were almost 40% and 32% drops for both funding in the seed and Series A funding stages, respectively. But despite this, the demand for products and services from Cybersecurity vendors still remained quite strong, especially as COVID19 was getting worse.
This trend can also be seen in the diagram below:
*Overall M and A activity decreased:
Ok, this may contradict what I just said earlier, but at least from the news headlines that I saw, there was more activity in this regard. But from the study that was conducted by Momentum Cyber, there was a significant drop off in this area, as illustrated in the diagram below:
The decline of M and A activity in the Cybersecurity Industry was the lowest from Q1 to Q3, right when the pandemic hit. But it looks like things settled down around Q4 of last year. This decline in M and Activity simply means that the exit opportunity for much more mature Cybersecurity vendors was much lower than pre COVID19.
*Seed funding is growing:
Hey on the positive side, at least seed funding for Cybersecurity companies is growing at a pretty good clip. Not by leaps and bounds, but slow and steady, which will bring far more value and quality to the table. This is illustrated in the diagram below:
Seed funding simply means that a Cyber startup has just opened their doors to the public and is on the verge of launching a revolutionary new product or service. This is considered to be the first-round funding. This Year Over Year (YoY) growth rate has been at a steady 13.2%, over the last decade.
*Israel continues to be the hot bed for Cyber growth:
When one thinks of new innovation and development, especially as it relates to Cybersecurity, the United States often comes to mind. But believe it or not, at least according to the amount of money that has been pumped into new companies, Israel remains at the forefront of this. Even this took me by surprise. You would think that with the 2,000+ vendors that exist here in the US, that we would be the leaders. But this not the case, as depicted in the diagram below:
Overall, the startups in Israel received $2.75 Billion in VC funding, which is an astonishing 97% Year Over Year gain.
*It is the more mature leaders that are shaping this environment:
When one thinks of a Cyber startup, the image of a young geek who hasn’t slept for days often comes to mind. But truthfully, this is not the case. Rather, it is the more mature and seasoned Cybersecurity professional who are leading the explosion in startups. These are also known as the “Serial Entrepreneurs”, and in Israel, these are 79% of the people that are in Cybersecurity. The other 21% were run by the proverbial “geeks”, as just described. This is depicted in the illustration below:
In fact, 36% of the new startups were run by these Serial Entrepreneurs in 2020, versus just 21% in 2019.
My Thoughts On This
Well there you have it, some of the top Cyber trends, from the business perspective, so far that are happening in 2021. While the M and A activity may still look a little uncertain, at least investments, new products and services, as well as Israel being the place for Cyber will continue to be strong. But in IMHO, there will be other factors that will fuel the growth for Cybersecurity, which are as follows:
*New variants of COVID19 coming out;
*The Remote Workforce taking a much more permanent foothold;
*The severe lack of Cyber professionals;
*The Cyber issues stemming from the meshing of both the home and corporate networks;
*The adoption of the Zero Trust Framework;
*The need for CMMC certification by Defense Contractors;
*The Threat Landscape becoming much more complex, sophisticated, and covert.
But don’t discount the United States yet for growth. Don’t forget that there is this place called Austin, Texas. When compared to the rest of the United States, Texas is a huge place for technological booms right now. For example, just recently, Oracle even announced that they were moving their corporate headquarters there.
So in the end, the demand for Cybersecurity will continue to be strong, not only from a demand perspective, but also from a financial one as well – also keep your eye as well on some of the major Cybersecurity stocks and ETFs – the can make you some nice $$$ also.