Why is cybersecurity gaining popularity among investors?

In 2021, the global volume of venture investments in cybersecurity reached $21.8 billion, breaking a historical record. Startups from the USA and Israel received 88% of these funds. In 2020, the industry attracted almost 2.5 times less — $8.9 billion. About 50 projects from this area are included in the list of "unicorns", 10 of them exceeded the estimate of $1 billion in 2021. In the same year, the industry set another record, committing investment transactions totaling $77.5 billion. According to experts, 2022 will be another year of achievements in a field of venture financing of startups solving information security problems. It is predicted that the rapid growth of estimates and the number of "unicorns" will continue.

Global Information Security Market

In the last decade, the cybersecurity sector has experienced rapid global growth. And the transition of many companies and everyday business processes online has given the market even more dynamics. The size of the global cybersecurity market in 2020 was estimated at $183.3 billion, in 2021 — at $217.9 billion and is projected to reach $539.8 billion by 2030 with an average annual growth rate of 11.6%. The industry's prospects are remarkably illustrated by the example of the largest global player — Palo Alto Networkst. The project was founded in 2005, three years later earned $ 3.1 million, and in 2021 the company's revenue exceeded $ 4 billion. In 2012, Palo Alto Networkst went public and since then has never grown at a level below double digits and only once — in covid 2020 - its growth was below 20%.

Variety of development vectors

The market and technological directions of cybersecurity development are very diverse, as are the threats they respond to. There are several segments that have become the most attractive for venture investors in 2021:

  • IoT infrastructure security.
    This sector accounted for $14.9 billion. It is expected that by 2026 this figure will increase to $40.3 billion, and the average annual growth will be more than 22%. In 2021, the number of devices connected to the network reached 46 billion units. Every few years, the IoT infrastructure doubles, and related cyber threats grow accordingly.
  • Transport cybersecurity.
    The influence of technological components on the processes of driving cars and planes, ships and trains, is increasing every year. Experts note that over the past three years, the number of cyber attacks on operational technological (OT) systems of the marine industry has increased by 900%. Losses from control intercepts can amount to billions, while most of them will not be compensated, since hacking of OT systems is not covered by insurance.
  • Cloud security.
    This area is expected to almost double in the next 5 years: from $34.8 billion in 2021 to $67.6 billion in 2026. Although companies have been slowly moving to the cloud over the past decade, the pandemic has significantly accelerated digital transformation. As companies increased the use of cloud solutions, the field for cyber attacks increased, painting this area red.
  • Application programming interface (API) security.
    Gartner has named attacks on the API as the #1 cyber threat in 2022. The working principle of the API is compared with pieces of puzzles, thanks to which various applications and services connect and interact with each other. Each "puzzle" can potentially carry a threat. Analysts estimate that 70% of corporations use more than 50 APIs in their information infrastructure. Only in the last month of 2021, two "unicorns" in the field of API protection appeared on the market - Israeli startups Salt Security and Noname Security.
  • Cybersecurity of critical infrastructure facilities.
    The targets of attacks in this area are companies operating in strategically important areas for the state: from healthcare and the banking sector to nuclear energy, defense, rocket and space industry. Skybox research shows that 83% of such objects were attacked in 2021. The volume of this direction has exceeded $21 billion, and increasingly large-scale and diverse threats stimulate further growth of government spending on cyber defense.

The accelerating digital transformation has changed the structure of government and business processes, giving impulse to the growth of the number and quality of cyber threats. Suppliers of products to protect against information attacks practically do not have to explain to customers the importance of investing in cybersecurity, at the same time, the market is still open to new players and solutions. Against this background, the potential of the cybersecurity industry becomes especially attractive to investors.

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