Private equity investment in cybersecurity sector soars amid shake-up
Private equity and venture capital investments in cybersecurity nearly doubled during the year to May 5, with total transaction value of $8.51 billion against $4.46 billion in the same period in 2023, according to S&P Global Market Intelligence data.
For the full year 2023, investments totaled $10.92 billion.
There were 132 announced deals so far in 2024, compared with 457 deals in all of 2023.
For the year to May 5, total investments stood at $6.65 billion, exceeding the combined first two quarters of 2023.
Sector disruption
The increased emphasis on cybersecurity worldwide is expanding the customer base while at the same time a major technical shift is occurring, causing the sector disruption that private equity tends to seek, according to Thomas Krane, managing director at Insight Venture Management LLC.
“The adoption of cloud has lended itself to a fundamental shift in terms of how cybersecurity is both delivered and thought of,” Krane told Market Intelligence.
“The traditional data center-oriented cybersecurity stack had to be completely rethought in the era of distributed workers, distributed workloads and the notion that the original corporate network is now the open Internet, and that has a lot of profound implications for the way that existing cyber vendors and incumbents have been disrupted.”
New vendors are emerging with cybersecurity technology that was designed to reside in the cloud from the start, expanding the number of players, Krane said.
Alex Doll, founder and general partner at cybersecurity-focused Ten Eleven Ventures added that consolidation in the sector has started and is expected to kick into high gear in the next six to 12 months, reducing the number of cybersecurity vendors.
In spite of record levels of investment, innovation is constantly required to meet emerging cyber threats. “As long as that’s the dynamic, you’ll see continued investments in innovation, particularly at the venture capital end of the spectrum,” Doll said.
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In the biggest deal so far in 2024, Thoma Bravo LP agreed to buy cybersecurity artificial intelligence company Darktrace PLC for $5.21 billion in an all-cash deal.
Europe received the largest amount of private equity and venture capital investment in 2024 year-to-date at $5.34 billion, brought about by the Darktrace deal. The US and Canada were second with $2.27 billion.
In terms of the number of deals, the US and Canada recorded 72, while Europe had 28 announced transactions.
