Last year, cybersecurity funding deals reached a record high, with Q3’16 as the most active quarter for deals to cybersecurity companies in the last five years. However, that record quarter was then followed by a notable slow down in Q4’16, with only 76 deals, the fewest since Q3’13.
Last year also saw the emergence of a new cybersecurity unicorn. Cylance obtained a $100M Series D round in June that valued the company at $1B. In 2015 four cybersecurity unicorns emerged: Illumio, Okta, Tanium, and Zscaler.
Last year’s record deal activity shows that cybersecurity remains hot in the wake of persistent security attacks and hacks faced by business and government. Investors are still predominately making bets in early-stage cybersecurity companies (seed & Series A), an indication that in an evolving cyber-threat landscape, new solutions are still needed that can help mitigate, and perhaps even predict, attacks.
Using the CB Insights database, we examined trends in global funding and exit activity to cybersecurity companies since 2012. This brief covers:
- Annual investment dollars and deals
- Annual financing trends by stage
- Annual exit activity: M&A / IPOs
- The most well-funded companies
- The most highly valued companies
Annual dollars and deals
Last year saw over 400 deals to cybersecurity companies, up from 378 in 2015. The category has seen new highs in deal activity every year since 2012. 2014 saw the biggest bump in activity, with nearly 100 more deals than in 2013.
2015 is still the highest year on record for dollars to cybersecurity companies, with nearly $4B invested in the industry. Last year, funding came in at almost $3.5B invested.
2016 saw four mega rounds ($100M+) in cybersecurity. The top deals last year went to: StackPath ($180M private equity), LogicMonitor ($130M growth equity), Cylance ($100M Series D), and Mobi Magic ($100M Series B). In 2015, the industry saw five mega rounds to the companies Tenable Network Security, Tanium, CloudFlare, CrowdStrike, and Illumio.
So far in 2017 through 02/07/17, there have been nearly 30 deals in cybersecurity. The biggest deal went to the endpoint security company SentinelOne ($70M Series C).
Quarterly dollars and deals
Q3’16 saw 114 deals to cybersecurity companies, the first quarter to break 110 deals. However, on a quarterly basis investment activity may be showing signs of cooling off. Q4’16 saw deals drop below 80, the first time deal activity has been that low since Q4’13, and fewer dollars were invested at the end of last year than in any quarter since Q1’14.
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Deal share by investment stage
Overall, the share of deals by investment stage has not fluctuated greatly over the past five years. On average, over half of the deals made by investors in cybersecurity since 2012 have been at the early stages (seed & Series A). Likewise, deal share in the “Other” category takes a significant share of the overall deals since 2012. “Other” includes convertible notes, a mechanism often used by investors in early stage deals.
Annual Exit Activity
Last year, there were fewer than 90 exits in cybersecurity, significantly fewer than in 2014 and 2015. The Indian company Quick Heal Technologies was the only cybersecurity company to IPO last year. In 2017, we have seen eight M&A deals through 2/7/2017. Those deals include the acquisition(s) of two cybersecurity companies that leverage artificial intelligence technology. The company Niara was acquired by Hewlett Packard Enterprise in February, and Harvest.ai was acquired by Amazon in January.
|Rank||Company||Disclosed Funding ($M)|
|1||Tenable Network Security||$302|
Most highly valued
Tanium is the most valuable privately owned cybersecurity company. Rounding out the top three are Lookout and Okta. Those three companies are among the most well-funded and most highly valued cybersecurity companies. The eight companies listed in the chart below are the eight cybersecurity unicorns valued at $1B+, as of 2/7/2017.
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