Big Rounds Push Cybersecurity Comeback
Cybersecurity venture investment jumped 43% in 2024 from the previous year as big rounds came back strong. That was despite flat funding quarter to quarter in Q4 and a smaller number of deals during the year.
Total funding to VC-backed cybersecurity startups hit nearly $11.6 billion last year, per Crunchbase data. That tops the $8.1 billion raised by startups in 2023, though remained well under the $17 billion invested in 2022.
Fewer deals, but big bucks
While dollars were up for the year, deal flow slowed notably. Only 639 rounds were announced last year, a 22% decline from 2023 and a 37% drop from 2022.
Despite the slowdown in the number of rounds, last year also saw a slew of huge deals completed in cyber. In fact, there were 29 rounds of $100 million or more raised by cybersecurity startups — compared to only 18 in 2023. Those rounds included:
- Cloud security startup Wiz locked up the biggest cybersecurity round of the year as it raised $1 billion at a $12 billion valuation. The round — announced just as the industry’s RSA Conference was getting underway in San Francisco in May — was co-led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital.
- France-based I-Tracing, a managed security service provider, raised a venture round of approximately $516 million in June.
- In August, secure content company Kiteworks raised a $456 million round from Insight Partners (which also participated in a $250 million Abnormal round) and Sixth Street. While the company did not specify a valuation, it did state it was a minority investment, meaning its valuation is greater than $1 billion.
Fourth quarter flat
The last quarter of the year did not provide a huge boost to 2024’s funding totals, as the $2.2 billion invested in 124 deals was about even with Q3, according to Crunchbase data. The number, however, did represent a 29% uptick from Q4 2023 when only $1.7 billion was invested in 170 rounds.
The biggest deals of the quarter included:
- In December, SandboxAQ raised more than $300 million at a valuation of over $5.6 billion, as the startup continues to look to apply quantum technology to AI development.
- In November, New York-based data security startup Cyera closed a $300 million Series D led by Accel and Sapphire Ventures at a $3 billion valuation. It was just April when Cyera raised a $300 million Series C led by Coatue at a $1.4 billion valuation.
- Finally in October, cybersecurity firm Armis Security closed a $200 million Series D led by Alkeon Capital and General Catalyst. The round boosts the company’s valuation nearly 25% to $4.2 billion. The San Francisco-based startup last raised a $300 million private equity round in 2021 led by One Equity Partners at a $3.4 billion valuation.
What it means
Although year-to-year numbers are higher, there do seem to be some issues pressing on cybersecurity funding numbers that cannot be ignored.
The fourth quarter last year represents the seventh consecutive quarter deal flow has slowed. It seems that while investors are betting big money on a select few companies, fewer companies are getting cash and that could soon cause some havoc in what is a typically well-funded startup environment in cyber. If funding slows more and exits remain difficult, startups may have to look at shuttering as the lone possibility.
Also, there is a real possibility that some VCs who looked at cyber are instead focusing their time and efforts on AI — which just completed an unheard of fourth quarter regarding venture investment. If investors — or at least their fund’s money — find AI more compelling right now, cybersecurity startups may find fundraising difficult, unless of course they too have an AI play.
Whatever the case, there is no denying fewer cyber companies are getting funded — and that could spell trouble for those founders who are looking for cash in 2025.
Related Crunchbase Pro list:
Related reading:
- Cloud Security Firm Wiz Raises $1B At $12B Valuation
- Cyber Startup Kiteworks Locks Up $456M From Insight, Sixth Street
- Cybersecurity Startup Abnormal Security Locks Up $250M At $5.1B Valuation
- Data Security Startup Cyera More Than Doubles Value To $3B In 7 Months
- Cyber Startup Armis Security Raises $200M At $4.2B Valuation
- Cybersecurity Funding Plummets 51% In Q3
- Eye On AI: AI Venture Funding Shattered Quarterly Records In Q4
Methodology
Cybersecurity is defined by the industries of network security, cloud security and cybersecurity, according to Crunchbase data. Most announced rounds are represented in the database; however, there could be a small time lag for rounds reported late in the quarter.
Illustration: Dom Guzman
