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Investment in cybersecurity start-ups defies lockdown slowdown

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Cybersecurity startups in the UK have raised more than $880 million since lockdown was first enforced, a new report from Plexal and Beauhurst shows.

The majority of investment, however, went towards relatively well established firms and only circa $16 million went to newly formed startups looking for their first investors.

Investment into cybersecurity startups rose by more than half (52 percent) in 2020, compared to 2019. The report states that investors were generally cautious with their money, mostly backing businesses that had secured funding in previous years, which meant funding for early-stage firms fell by 96 percent year-on-year.

Compared to 2019, the total number of deals involving cybersecurity startups rose by a third, while deals in the broader market fell by more than a quarter (26 percent).

Further showcasing the strength and the resilience of the cybersecurity market, the report states that just 23 cybersecurity startups entered either administration, liquidation or dissolution since late March, compared to 1,715 across all sectors.

The majority of the funds, however, went to just a few large scale-ups: OneTrust ($305m), Snyk ($209m) and Privitar ($95m).

“While increased total funding demonstrates the relevance of cybersecurity and shows that the UK’s cyber industry has not been impacted to the same extent as others, the almost complete absence of backing for early-stage firms puts the sector’s future at risk. It is these companies that we will ultimately rely on to solve the inevitable new cyber challenges arising from a society that is increasingly digital-first,” said Saj Huq, Director of Innovation at Plexal.

“Covid-19 has accelerated digital transformation, increased the demand for digital services and reinforced the relevance of security as a crucial business enabler. More cybersecurity companies are receiving investment as a result, but the caution exercised by investors is preventing the UK’s cyber sector from becoming the key driver of the economic recovery that it should be. Investors, industry, academic institutions and government must come together to safeguard the future of our brightest, early-stage cyber startups or they could become a lost generation.”

Sead Fadilpašić

Sead is a freelance journalist with more than 15 years of experience in writing various types of content, from blogs, whitepapers, and reviews to ebooks, and many more, across sites including Al Jazeera Balkans, TechRadar Pro, IT Pro Portal, and CryptoNews.