Exit activity in the cybersecurity sector is climbing. Average cybersecurity exit valuation multiples have increased since the start of 2012 but median exit valuation multiples have contracted slightly.
An increasing amount of cyberthreats has prompted investors to put nearly $1.4 billion into cybersecurity firms ranging from mobile app security platforms to online authentication infrastructure. Besides the increased threats and need for these security solutions, VC investor interest is also being helped by strong activity on the exit front.
In the past 12 months, 78 cybersecurity firms have exited via M&A or IPO, including mobile sensor startup Authentec (acquired by Apple), Credant Technologies (acquired by Dell) and MDM firm Zenprise (acquired by Citrix). In fact, cybersecurity exit numbers in the first half of 2013 have already surpassed 2010 exit levels. Between 2011 and 2012, cybersecurity exit activity grew nearly 50% and jumped 109% from 2010 to 2011.
Valution multiples for security startups have seen a broad range of values ranging from the low-end of 0.2x to a high of 80.0x since the start of 2010.
Over the period, the average P/S ratio in the cybersecurity market has stood at 10.9x and the median at 4.9x. The average valuation multiple has actually increased over time with it coming in at 7.9x in 2010 and 2011 and subsequently climbing to 11.9x since the start of 2012. However, median cybersecurity P/S multiples have contracted slightly from 6.2x to 4.8x in similar time frames. The chart below shows the diversity of valuation multiples for private cybersecurity firms over the past three years.
