Cybersecurity investments are soaring: here is why this is a good thing
As investments in cybersecurity startups reach record numbers, VCs need to watch more than just the unicorns.
The pandemic has undoubtedly changed our lives in numerous and permanent ways. The need for social distancing has influenced how we conduct meetings, how we work, how we do groceries, how we work out, how we meet loved ones...and how we get targeted by criminals.
As in-person interactions were reduced and companies adopted work from home models, hackers took the opportunity to increase hacking and ransomware attacks. As a result, numbers have been rising in terms of costs and incidences. Cybersecurity Ventures estimates that cybercrime will cost the world USD 6 trillion by the end of 2021, double the cost in 2015. In addition, the Identity Theft Resource Center (ITRC) reported that the number of publicly-known data breaches in 2021 had already exceeded the total for 2020.
While thousands go unreported, some cyberattacks and ransomware attacks were highly publicised. In October, we listed three of the biggest ransomware attacks of 2021, with a caveat: "so far". Two months later, hacker attacks on health websites in Brazil took down much-needed official websites and applications, especially during the pandemic.
It's no wonder, then, that while hackers have become more "professional", cybersecurity startups have increased in number and investments into those startups have also soared. CB Insights's report showed that the number of cybersecurity unicorns, that is, privacy cybersecurity companies valued at at least U$ 1bn, has soared past 30, with most headquartered in the United States. For 1H21, the influx of cash reached U$ 7.8bn, more than the entire year of 2020, according to Crunchbase data.
The increasing investment in this type of company is in line with the sector's need to move away from a DIY approach to cybersecurity. As CB Insights found, managing multiple vendors, staying up to date on the latest technology and threats, and hiring qualified talent can strain corporate security teams. Outsourcing cybersecurity or using SaaS apps and providers can help companies keep their data and their customers' information safe.
The need to look outside of the unicorn bubble
Though it is good news that the number of unicorns in cybersecurity has increased, there is an ongoing need to keep capital flowing towards new and promising startups. The next generation of cybersecurity startups will help us meet the challenges of threats for the years to come.
As threats evolve and become more diverse, so must the defenders. When we talk about cybersecurity, diversity is vital. The categories are broad, from data firewalls, outsourced security, SaaS security, advanced cryptography, and even post-quantum cryptography. More well-funded startups mean more defense lines.
This is particularly necessary as ransomware attacks have shown to bring large corporations to an operational halt, forcing millions of dollars in ransom payments. The payments are naturally a large risk companies want to avoid, but the costs in the consumer and investor trust - not to mention the possible wider societal repercussions, such as was the case with Colonial Pipeline, are even higher.
Now is the time to invest and grow our cybersecurity defenses. Even as the pandemic subsides, companies intend to keep some sort of work from home scheme, our lives are getting more and more digitised, and the opportunities for online criminals are constantly expanding. We, as a society, need to rise to this challenge, facing these threats with leading technology, great market talents, and ongoing innovative solutions. And we need the cash to do so.
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