Venture Capital Funding in Information Security Is in Midst of Rebound in North America and Europe – Report

Infosec VC (venture capital) funding in North America and Europe is in the midst of a “rebound,” according to a report from PitchBook which noted that that the ecosystem is driven primarily by late-stage rounds.

PitchBook pointed out that they have tracked $8.8 billion in VC funding through Q3 2024, putting the market on pace to “surpass 2023’s total of $10.9 billion.”

According to the research report from PitchBook, venture-growth funding has already reached 2023’s total, notably showing that the “largest companies will be responsible for funding growth.”

The research study from PitchBook also mentioned that pre-seed and seed pipeline is not filling the funnel, with the “cohort lagging the early stage and late stage in deal count for the first time, though we may add more pre-seed and seed deals to our database over time.”

The research report released by PitchBook further revealed that “median late-stage valuation continues to decline since the market downturn in Q3 2022, reaching $54 million across 72 deals in 2024—the lowest since 2019.”

PitchBook also mentioned in its update that late-stage VC deal count continues to equal early-stage deal count, a “concerning trend for early-stage startups.”

The IPO pipeline remains loaded, and the market is “watching the performance of Rubrik’s recent listing. VC exit volume has remained constant, with outliers driving VC returns.”

PitchBook also revealed that they have “tracked nine exits over $100 million through Q3 2024, a similar pace to 2023.”

This volume allows some early-stage VCs to excel yet “limits the overall returns from the vertical, especially given that the only deal that closed above $1 billion was Rubrik’s IPO.”

PitchBook also clarified in the latest report that they “did not track an exit value for most acquisitions, which may include some takeunders: down acquisitions that return capital to investors and bring on startup leaders as employees.”

Each leading incumbent has made at least “one acquisition in 2024, though only a few—such as Cisco, Fortinet, and Zscaler—have made multiple acquisitions.”

PitchBook further noted that most acquisitions they have tracked fall under $300 million, and three acquisitions had “valuation step-ups of 2.3x to 2.5x from the last VC round.”

Early-stage specialist VCs continue to benefit “from these deals, even as midstage companies languish without alignment on acquisition prices.”

Outlier “winners” such as Snyk and Wiz will drive “exit value going forward as
they decide to pursue IPOs.”

Common vulnerabilities include data requests “within applications, injection of malicious scripts into existing code, and contamination of log file entries and HTTP headers.” This market addresses the increasing focus on “software supply chains resulting from prominent ransomware attacks and open-source vulnerabilities.”

Traditionally, the report stated that infosec vendors have “not addressed this opportunity, instead focusing on network traffic and endpoint operating systems.”

PitchBook added that with cloud-native applications now “disrupting this infrastructure, a separate class of vendors has been trusted to protect applications deployed in the cloud, on the web, or on-premises.”

As a result, the AppSec segment has “existed for only 10 to 15 years.”

The AppSec testing market reportedly reached “a stable equilibrium in 2023 with the  vendors Synopsys, Veracode, HCLTech, and GitHub maintaining their market shares and accounting for65.3% of the $1.7 billion market.”

PitchBook pointed out that over the past two years, incumbents such “as Cisco, CrowdStrike, Palo Alto Networks, and Rapid7 have made moves into AppSec with the intent to unify security policies across the developer lifecycle.”

The report from PitchBook further explained that the intent to bring infosec closer to developers “faces adoption challenges that favor companies commercializing open-source and developer-first software over companies attempting to get developers to use security software when it slows them down.”

PitchBook concluded in its latest report that AI for coding assistance, as well as intelligent application development, presents “a new wave of software development that may disrupt the market and encourage development of new security solutions.”



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