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- PitchBook just released a 90-page report analyzing promising startups in the $121.3 billion cybersecurity market.
- Analysts say cybersecurity provides relatively stable opportunities to invest, and that an evolving workplace as we emerge from COVID-19 will sustain innovation and growth.
- Cybersecurity is giving rise to powerful startups that compete for market share like Netskope, which hauled in a $340 million funding round in February.
- The startups spotlighted by PitchBook also include new companies bringing innovation, such as 20-person Confluera, which just popped out of stealth mode to help companies track hackers in real-time.
- Visit Business Insider’s homepage for more stories.
In a crazy, rollercoaster stock market, cybersecurity offers investors a range of relatively stable opportunities, ranging from billion-dollar companies competing for market-share to new companies providing novel innovation, according to new research.
A 90-page report from investment analysts PitchBook estimates the cybersecurity industry as a $121.3 billion market (based on overall annual sales), projected to rise to $160 billion by 2023. Investors say there is great promise in key market segments that protect remote workers, help businesses with data compliance regulation, and protect Internet of Things devices.
Investments now could pay off handsomely in a recovery, PitchBook says: “We expect that a recovery would drive demand for information security technologies to defend broader enterprise surface areas including home networks, multi-cloud environments, and mobile device networks, benefiting longer-term investments in application security, network security, data privacy and identity and access management.”
The startups range from Netskope, a cloud security startup that hauled in a $340 million funding round in February to 20-person Confluera, which just popped out of stealth mode to help companies track hackers as they invade networks.
PitchBook says the analysis is needed in an industry that confuses many. “It’s a space people have blown off because it seems over their head, but now they’re curious about it and they see the investment opportunity,” says Brendan Burke, one of the analysts who wrote the report.
Investors say cybersecurity startups are worth studying up on, at a time when many industries may not have much short-term upside.
“I do think there’s enough capital for cybersecurity companies to continue growing,” says Deepak Jeevankumar of Dell Technologies Capital, whose firm is an investor in Netskope and Zscaler, a cybersecurity startup that went public two years ago.
Here are 13 startups spotlighted by in the report, with all information taken from PitchBook:
Auth0 – A growing unicorn in identity management
What it does:Auth0 helps developers to build single sign-on, multi-factor authentication and passwordless logins and customize them to enterprise environments by providing simple code-based integrations that embed the service within existing systems.
What PitchBook says:“Auth0 can maintain a high expansion rate and potentially increase its growth as it benefits from burgeoning demand for identity solutions.”
Total venture capital raised:$213.5 million
Investors:Sapphire Ventures, Capital Partners, WiL (World Innovation Lab), Meritech Capital Partners
Big ID – Data security startup in a booming area
What it does:BigID uses advanced machine learning and identity intelligence to help enterprises safeguard and assure the privacy of their most sensitive data, reducing breach risk and meeting compliance requirements like Europe’s General Data Protection Regulation (GDPR).
What PitchBook says:BigID’s partnerships illustrate “the potential for new security requirements to cause market dislocations and create startup opportunities” and “the high appeal of this segment for late-stage VC and high growth.”
Total venture capital raised:$146.16 million
Valuation:$500 million to $1 billion (per Crunchbase)
Investors:Scale Venture Partners, Bessemer Venture Partners
BitGlass – ‘A market leader’ in network security
What it does:BitGlass develops enterprise security software that secures corporate data residing on third-party servers, enabling enterprises to embrace the cloud while ensuring data security and regulatory compliance.
What PitchBook says:“Startups can seize market share in network security from legacy firewall vendors,” and Bitglass “has become a market leader” in cloud security as a venture-backed company, suggesting that startups may become leaders in emerging categories.
Total venture capital raised:$150 million
Investors:Singtel Innov8, New Enterprise Associates and Norwest Venture Partners
Cato Networks – ‘Advanced visionary’ in cloud network security
What it does:Cato Networks is the developer of a cloud-based enterprise security platform providing a secure network connection to all enterprise locations, people and data.
What PitchBook says:“Cato Networks is the most advanced visionary” in one cloud computing area of analyst firm Gartner’s Magic Quadrant, “demonstrating that private companies are more advanced in some areas of network software than Cisco or VMware. We expect that novel network architectures for hybrid cloud environments and IoT networks can support unicorn valuations given the limitations of incumbents in those areas.”
Location:Tel Aviv, Israel
Total venture capital raised:$202 million
Investors:Lightspeed Venture Partners, Greylock Partners
Confluera – Young startup addressing market gaps
What it does:Confluera is the developer of a network security interception platform intended to detect and stop attackers in real-time, allowing companies to radically simplify and manage security operations.
What PitchBook says:“On the early side, Confluera recently emerged from stealth and is addressing multiple market gaps by delivering continuous threat monitoring with a graphical user interface that tracks attacks as they develop, allowing security teams to more quickly threat hunt and conduct forensic analysis.”
Location:Palo Alto, California
Total venture capital raised:$30 million
Investors:Icon Ventures, Lightspeed Venture Partners, Harpoon
Cybereason – User-friendly endpoint protection
What it does:Cybereason is the developer of a cloud-based endpoint detection and cybersecurity platform designed to protect companies from advanced cyberattacks.
What PitchBook says:“Cybereason should continue to grow” because “the company surfaces malicious operations in a user-friendly interface, enabling enterprises to identify the root cause and scope of cyberattacks with minimal manual effort.”
Total venture capital raised:$390 million
Post valuation:$1 billion
DarkTrace – IPO candidate using machine learning to find new threats
What it does: DarkTrace is the developer of a cyberthreat defense platform that detects and responds to previously unidentified threats, enabling businesses to protect against threats to the cloud, email, IoT, networks and industrial systems.
What PitchBook says: “Darktrace is an IPO candidate that may have to delay its plans in the current economic environment.” With a machine-learning approach to threat detection, DarkTrace faces “weak” competition from incumbents including Cisco and FireEye, PitchBook says.
Location:Cambridge, United Kingdom
Total venture capital raised: $238 million
Valuation: $1.6 billion
Investors: Vitruvian Partners, Samsung Venture Investment, Kohlberg Kravis Roberts, Ten Eleven Ventures, and Balderton Capital
Netskope – ‘Market leadership in cloud security’
What it does: Netskope is the developer of a cloud analytics platform that protects data, stops threats and responds to incidents. The company’s platform eliminates blind spots, guards data everywhere, and stops elusive attacks, enabling businesses to protect sensitive data and ensure compliance in real-time.
What PitchBook says:“Netskope has developed market leadership in cloud security despite the arms race of incumbents. The Netskope management and board of directors has substantial experience at publicly traded companies, causing Pitchbook to believe Netskope will pursue an initial public offering in the medium term.” On that subject, CEO Sanjay Beri told Business Insider “while we will one day, nothing is planned in the short term.”
Location:Santa Clara, California
Total venture capital raised:$754 million
Valuation: $3 billion
Investors: Sequoia Capital, Dell Technologies Capital, Base Partners, Lightspeed Venture Partners
OneTrust – helping companies with privacy compliance
What it does:OneTrust provides a privacy management platform that helps businesses comply with data privacy regulations, including GDPR, and assessing data vulnerabilities in their vendor by taking inventory of their data.
What PitchBook says:“OneTrust achieved scale before requiring venture funding, but has recently accepted VC to take advantage of GDPR opportunities. The company raised a $210 million Series B, less than a year after its $200 million Series A, suggesting that OneTrust has a similar growth profile to leading IT unicorns.”
CEO: Kabir Barday
Total venture capital raised:$410 million
Valuation: $2.7 billion
Investors: Insight Partners and Coatue Management
Securiti.ai – Finds leaked personal data using AI
What it does:Securiti.ai is the developer of an artificial intelligence-powered cybersecurity and data-protection platform intended to protect privacy. The company finds personal data in structured and unstructured systems and links it to the owners.
What PitchBook says:“Investments of $50 million were completed for competing data privacy & compliance platforms Securiti.ai and BigID as well, at large valuation step-ups, demonstrating the high appeal of this segment for late-stage VC and high growth for multiple market entrants.”
CEO: Rehan Jalil
Location: San Jose, California
Total venture capital raised: $81 million
Valuation: $250 million
Investors: General Catalyst, Mayfield Fund
SentinelOne – increasing valuation as it fights off nation-state attacks
What it does: SentinelOne makes endpoint protection software that protects devices and servers against malware and threats. The company’s software unifies the detection, prevention and remediation of threats initiated by nation-states and organized crime, enabling organizations to defend against advanced cyberthreats.
What PitchBook says: “SentinelOne’s $200 million Series E made it a unicorn…SentinelOne addresses cloud and IoT endpoints, separating it from legacy endpoint detection platforms. For this reason, we believe that its valuation will likely continue to increase.”
CEO: Tomer Weingarten
Location: Mountain View, California
Total venture capital raised: $429.5 million
Post valuation: $1.1 billion
Investors: Insight Partners, Samsung Venture Investment
Snyk – Open-source security leader
What it does: Snyk makes security analysis tools designed to identify open-source vulnerabilities. The company’s security analysis tools find, fix and monitor threats in open source computer code.
What PitchBook says: “Application security had a record quarter of VC deal value in the (fourth) quarter following Snyk’s record $150 million…the largest-ever Series C in infosec.” The report also says: “We believe that the DevOps security market has the potential to create multiple unicorns, reflected in the recent VC mega-deals for Snyk and SentinelOne.”
CEO: Peter McKay
Total raised: $254.5 million
Post valuation: $1 billion
Investors: Stripes, Trend Forward Capital
WhiteSource – Could be ‘an attractive target’
What it does: WhiteSource makes a software solution for agile open-source security and license compliance management. The company’s software integrates with development environments to detect open-source code with security or compliance issues in real-time.
What PitchBook says: “WhiteSource is an innovator in [software composition analysis] and we believe the company could be an attractive target for legacy application-testing vendors” when it comes to acquisitions.
CEO: Rami Sass
Location: New York
Total raised: $46 million
Valuation: Not available
Investors: Susquehanna Growth Equity, M12