Start-up in Cyber Security Going Through Rough Times

Cyber attacks will be in news in the coming days as its going to keep the US cybersecurity on its toes. A lot of the companies are yet to keep up with the promise that they made earlier.

Most of the times the security products that are developed is overtaken by the hackers, as they are a step ahead to crack something that comes into the market. In other cases, big companies have come up with similar technology and given the customer little choice.

David Cowan at Bessemer Venture Partner that has invested in the cyber security sector, said “I have never seen such a fast-growing market with so many companies on the losing side,” said David Cowan, a partner at Bessemer Venture Partners.

The contemporary belief still seems to be lurking that the industry is still looking at a way to counter cyber attacks, and as of now there is no end in sight to companies. So Venture capitalists are reining in more money for research and development on this matter.

Not only is the technology behind cyber attacks rapidly evolving, the nature of how the corporate world uses security firms is changing. To save money and trouble, some companies have consolidated their security work, using just a few large players rather than spreading business around.

As said above that cybercriminals are a step ahead, and their technology is rapidly evolving. Looking at the way organizations are using security it seems they are serious. To save their resource, time and money organizations have enhanced their security. Companies are also funding such security firms to do the research and identify security weakness.

Dave DeWalt, the former CEO of cybersecurity company FireEye “Suddenly, we are in this situation where there are just too many vendors and too few can be sustained,”

Eric McAlpine, Co-founder, Momentum Cyber, an advisory firm focused on cyber industry mergers and acquisitions, said it tracks 2500 security companies today, almost double the number a few years ago. The firm’s co-founder, Eric McAlpine, estimates 300 cybersecurity start-ups launch every year.

Big software companies are showing less interest to acquire cybersecurity product, since they believe they can have their own product development at their center.

Tom Kellermann, chief executive of venture capital firm Strategic Cyber Ventures said “The pipe dream days of selling companies at a richer price equivalent to ten times their revenue is gone.”

The only US cyber security company that helps to secure the device of its employees is FoeScout Technologies. ForeScout raised US$116 million in an IPO in October that valued the company at about US$800 million, down from its US$1 billion valuations in the private markets a year earlier. This compares to three cybersecurity IPOs in 2016 and four in 2015.

Its backers, including Intel Capital and Accel Partners, had to moderate their valuation expectations for the IPO to be successful. The company is now trading at a US$1.2 billion market capitalization.

In the Pipeline

Many venture capital firms are sticking with the sector. Some are curbing their bets or backing smaller startups.
Venture capital firms are holding their cards close to their chest when it comes to supporting startups. According to the report, it is likely that Start-up will grow.

Yoav Leitersdorf,  YL Ventures the investor in Hexadite, said “Start-ups that are likely to reach between US$100 million and US$300 million in value are still offering excellent opportunities for an exit.

A company like Carbon Black which was founded in 2002 by former US government has delayed their IPOs. Formerly known as Bit9, the company developed a tool that detected threats that targeted corporate networks. The CEO of Carbon Black declined to comment on the plans of an IPO or any mergers.

Zscaler, the specialist in cloud security, is another startup has hired investment banks to go public last year. Their focus is on growing its revenue. The confirmation is yet to be stated by Zscaler as they declined to comment.