Funding into security increases as hacks show no let up–VCJ data spotlight


So long as high-profile hacking events and security breaches occur, funding into cyber security companies will also continue to rise.

That’s one of the takeaways according to a preliminary analysis of Thomson Reuters data, in which VCJ looked at deals for U.S.-based startups focused on developing threat detection, security infrastructure and related security technologies.

Through the first half of 2015, VCJ found 160 such deals in the broad security space having raised about $2 billion, compared to 148 deals raising $1.54 billion through the first six months of 2014.

It’s not hard to figure out why the uptick in security funding. In 2014, high-profile hacks involving retailers Target and Home Depot as well as Sony Corp dominated the headlines. In addition, hackers working for the Chinese state breached the computer system of the Office of Personnel Management in December, although the breach wasn’t detected until April. This year, there’s been no let up, as 2015 has already become the year of the healthcare hack. Anthem, the nation’s second-largest health insurer, said in February that hackers broke into a database containing the personal information of nearly 80 million consumer records.

Then in July, a hack occurred at the popular online adultery site Ashley Madison.

“There’s never been a better time to fund security startups,” said Enrique Salem, managing director of Bain Capital Ventures and former CEO of security software provider Symatec.

“Cybersecurity threats are at an all-time high. So is security awareness. It has the attention of every boardroom worldwide. That translates into more budget for CIOs and CISOs dedicated to security.”

It also appears to be a good time for security companies to exit.

In late July, Microsoft Corp announced plans to acquire Israeli cyber security company Adallom for $320 million. Adallom, which develops cloud security platforms, had raised about $50 million from Index Ventures, Sequoia Capital and others.

In another notable cyber security acquisition, online payments company PayPal earlier this year bought Israeli cyber security company CyActive for $60 million. CyActive, which forecasts cyber attacks and offers companies detection and prevention services, received a strategic investment from the venture unit of Siemens. Jerusalem Venture Partners, an Israeli venture firm, is also an investor.

More recently, Avast Software announced it has acquired Redwood City, Calif.-based Remotium, a provider of enterprise security services to protect mobile devices. Financial details were undisclosed. Remotium, which had raised seed funding from Draper Nexus Ventures, was named the Most Innovative Company at the RSA Conference in San Francisco in 2013.

Not all exits involved an M&A. In mid-July, Boston-based security data and analytics provider Rapid7 debuted its IPO, raising $103 million. The company was backed by Bain Capital Ventures and Technology Crossover Ventures.

This story first appeared in affiliate magazine Venture Capital Journal, which is published by Buyouts Insider. Subscribers can read the full story and data, including a table of top security deals in the first half of 2015 by clicking here. To subscribe to VCJ, click here for the Marketplace.

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