Cybersecurity – What’s Happening at the Early Stage?

As the bad guys get smarter, startups aiming to combat cybercrime and security breaches are proliferating – and bulking up. From endpoint protection to mobile app security, venture capital investors are writing checks to a diverse range of companies in the cybersecurity market. And things are getting especially interesting at the early-stage.

Since 2010, early-stage venture activity (defined as seed/Series A financings) in the cybersecurity ecosystem has risen significantly as threats expand to new devices, cloud-based resources & virtual networks. In 2013, early-stage deals comprised 47% of all global cybersecurity financings. And 2014 has seen the early-stage surge continue with 54% of cybersecurity deals coming at the seed or Series A stage over the first 3 months of the year. Of note, cybersecurity early-stage deal activity hit its highest level since the start of 2010 in Q1 2014 at 42 deals. Q1 2013’s funding high was driven by a $225M Series A round to AirWatch, now owned by VMWare.

Cybersecurity early-stage deal sizes rise since 2011

Cybersecurity Series A deal sizes have bumped up over the past three years. 2011 saw cybersecurity startups raising, on average, $5.1M vs. $7.0M in 2012 and $6.6M in 2013 (after stripping out AirWatch’s mega-round). Peeling back Series A cybersecurity deals over the last four years, we see the average round comes in at $6.5M while average seed deal sizes have weighted in at $891K.

Cybersecurity most active early-stage investors – A16Z leads

On a unique company basis, Andreessen Horowitz has been the most active cybersecurity VC (we analyzed both pure-play and corporate VCs) at the early-stage since the start of 2010.  A16Z has invested in over ten firms at the early-stage including Bromium, Pindrop, Bluebox, Illumio and Morta Security (recently acquired by Palo Alto Networks). While Intel Capital has been the most active corporate VC in cybersecurity and has notched some high-profile exits, Google Ventures actually has been the most active early-stage CVC in the space over the period investing in firms including Ionic Security, ThreatStream and Duo Security.

The top 20 most active early-stage cybersecurity investors based on the number of unique company deals are listed below.

To view the early stage deals in cybersecurity in this brief, click here after logging into CB Insights.  It will automatically run a Deal Search with the appropriate pre-set deal filters.  You can ten refine it further by geo, investor, amount raised, etc as you choose.

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