Cybersecurity investment sets record pace in Q2

Cybersecurity investing held up its rapid pace this year with U.S. cybersecurity startups raising a record $1.5 billion in the second quarter, according to data from Thomson Reuters.

The quarter included large deals, such as KnowBe4’s $300 million round and SentinelOne’s $120 million funding.

(See bottom of story for a list of cybersecurity companies that raised the most venture capital so far this year.)

Q2 topped the previous record of $1.39 billion in 2018’s second quarter. Cybersecurity investing for the first half of the year stands at $2.6 billion, well ahead of the $1.94 billion in the first half of 2018.

Investors, however, pulled back on deal volume, with a 110 deals taking place through midyear, compared with 124 in the first half of 2018. Average round size was up by a third to $23.5 million.

The quarter’s strong investment pace was the result of large investment rounds in late-stage cybersecurity companies, said Robert Ackerman, managing director of AllegisCyber Capital.

“I would expect to see this trend continue,” Ackerman said.

VCJ Cybersecurity
Ackerman

This reflects the enthusiasm for cyber companies tracking toward an IPO, given Crowdstrike’s strong performance, he said. Also, there is growing awareness that the current market cycle is likely in its later innings and there is a bias toward later-stage investments in more mature companies, Ackerman said.

The activity puts 2019 on track to be another record year in the space. Last year set a record with $3.8 billion invested in young U.S.-based cybersecurity companies.

“We need to see the next wave of new ideas in cybersecurity to drive early-stage investments,” Ackerman said.

Download Excel spreadsheet: Top VC-backed cybersecurity companies in U.S. (based on funding YTD)