Smart money VCs are on pace to participate in fewer cybersecurity deals through the end of this year, compared to 2015. This year, through Q2’16, the top two dozen smart money VCs participated in nearly 30 cybersecurity funding rounds — deals that totaled $657M in aggregate.
By year-end, 2016 is on track to see roughly 50 cybersecurity deals with smart money VCs involved, deals that together are projected to account for nearly $1.2B in funding. Last year we saw these VCs involved in 56 deals worth nearly $2B.
In 2015, smart money VCs participated in a flurry of $100M+ mega-rounds that included: CloudFlare ($110M Series D), and Tanium ($118M Series G). The largest round of last year involving a smart money investor was to Tenable Network Security (a $250M Series B).
Accel Partners participated in that round after also backing Tenable in 2012 with a $50M Series A.
Interest from smart money VCs is buoyed by the fact that five out of the nine private company unicorns in cybersecurity reached their $1B+ valuations last year. Cylance, an artificial intelligence and machine learning cybersecurity company, secured a $100M series D investment in June 2016 and emerged as the newest cybersecurity unicorn. Smart money VC Khosla Ventures, was also involved in that round, after also participating in the company’s Series A and B rounds.
For more on how we selected our 24 smart money VCs, please see the explanation and full smart money list at the bottom of this post.
Deals that include smart money VCs rose through 2014, topping out at nearly 60, and started to slip slightly in 2015, at 56. Deals for the present year through Q2’16 were at 29 and on an annual basis are projected to fall under last year’s total.
From 2012 through the end of last year, there was a significant run-up in the amount of funding dollars to cybersecurity coming from deals that involved smart money VCs. This year, with the current run-rate through Q2’16, dollars and deals involving smart money VCs are projected to fall just below last year’s peak.
Quarterly trends in smart money cybersecurity investment
Looking at the quarterly dollars and deals trend, we see that Q1’16 was the fifth quarter in a row with 10+ deals with smart money VC backing, seeing $296M in funding across 13 deals involving smart money VCs.
Cybersecurity business social graph
We used our Business Social Graph tool to visualize how smart money VC investors and their portfolio companies in cybersecurity are interrelated. Since 2012, smart money VCs have co-invested several times including a deal to the unicorn Okta, a $75M Series F at a $1.2B valuation, with smart money VCs that participated in that round including: Sequoia Capital, Andreessen Horowitz, Khosla Ventures, and Greylock Partners.
Please click to enlarge – image includes investments from 1/1/2012 – 7/21/2016.
Note: To analyze smart money trends, we looked at the activity of 24 top VC firms, selected according to portfolio valuations and investment outcomes. Some of the investors are linked to relevant research briefs. Here’s our full list of 24 smart money investors:
- Sequoia Capital
- Benchmark Capital
- Accel Partners
- Greylock Partners
- Andreessen Horowitz
- Union Square Ventures
- First Round Capital
- Bessemer Venture Partners
- Kleiner Perkins Caufield & Byers
- New Enterprise Associates
- Founders Fund
- Lightspeed Venture Partners
- Foundry Group
- Index Ventures
- Khosla Ventures
- Social Capital
- Emergence Capital Partners
- True Ventures
- Floodgate Fund
- General Catalyst Partners
- Spark Capital
- Battery Ventures
- Redpoint Ventures
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