Security Roundup: Funding Frenzy, Barracuda, Fake Email Barrage

Investment firms are pouring tens of millions of dollars into cybersecurity companies, including both well-established businesses and startups.

Just this week, Vade Secure, KnowBe4, Critical Start, Cyber Observer, Edgewise Networks and Orca Security all reported getting millions in funding from investment firms. And all of the companies said the money will be used to fuel growth and beef up their technology to get a jump on their competitors.

So what’s behind this upswing in cybersecurity investment? We asked Mike Sapien, Ovum’s vice president and chief analyst of enterprise services, who covers security services.

Ovum’s Mike Sapien

“Clearly the demand for security technology and services is very high with every firm wanting to know and secure their best security posture,” he said. “But there is also some concern now of overfunding firms or having too many firms offering the similar technology. I think investment firms/venture funds are being more careful as they know that many will not last or may not be first to gain adoption.”

If you assume there is some overfunding and that some firms might not make it or get stalled, then private equity firms might have some opportunity to “pick up assets on the cheap to assemble a variety of security assets into one stronger company,” Sapien said.

“And if there is slowdown in the initial public offerings (IPOs), then the environment gets ideal for private equity to take some firms over when the IPO option becomes unviable,” he said.

A few of these new firms might change the cybersecurity landscape, but it’s more likely that the established players take over many of the new technologies and/or buy up the smaller firms, Sapien said.

“Customers/CISOs/CIOs are in the state of ‘security tool fatigue’ now,” he said. “They are done with buying new tools to solve a security problem and are more likely to go to the established players and ask for the same technology. This will lead to more consolidation and integration … than the few breakout winners in the vendor and provider landscape. Most customers do not want to spend the time and staff to vet new security tools or technologies, and [are] looking to their current vendors/providers to vet the new shiny objects in security.”

Along with M&A, this cybersecurity investment is part of the “needed consolidation” now, with pressure from the skilled talent shortage and customers wanting integrated security offers, Sapien said.

“The M&A is a byproduct of these trends,” he added. “I expect this consolidation to occur for the next few years.”

KnowBe4 is set to receive a $300 million investment led by global investment firm KKR, with significant participation from existing investors Elephant and TenEleven Ventures. This new infusion of funds, valuing the company at $1 billion, is expected to be used for global growth initiatives and platform development, and builds upon KKR and TenEleven Venture’s initial investment in early 2019.

Tony Jennings, KnowBe4’s vice president of global partners and channel, tells us the funding will help his company increase its …