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

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.

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.

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.

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%.

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).

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 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.