Early-Stage Cybersecurity Investments on the Rise Again: DataTribe


Tech incubator DataTribe finds signs of recovery after a slump in investment. DataTribe’s Q3 report reveals early-stage investments in cybersecurity rose for the first time in 2020. The downward spiral started toward the end of 2019, continued through Q2 2020, and is now on the verge of stabilization.

The global health crisis delivered a big jolt to venture capital investment, which slowed down across the board for all sectors through most of Q2. The pandemic sunk the markets, and analysts posited that any recovery could be possibly ‘years out.’

However, a newly-released report from DataTribe, a global cybersecurity foundry, also dubbed the cybersecurity startup studio hints at signs of recovery, partly driven by significant VC appetite and a ‘decline in other investment verticals.’

Per DataTribeOpens a new window , in Q3, cybersecurity represented 19% of U.S. early venture activity, up from the previous high of 14.9% in Q2. Strengthening security posture has always been a tough standard for any CISO, which is more so in the current environment. DataTribe’s report Q3 2020: Signs of Stabilization paints a telling picture of how the crisis sharpened the focus on cybersecurity and compelled security leaders to look to cyber protectionist strategies to ensure business continuity.

DataTribe’s report reveals the decline in cybersecurity investments was observed in Q2 2019, even before the crisis struck. The findings indicate seed and Series A valuations are down 2% and up 14%, compared with the same quarter in 2019. Just for a quick comparison, the median value of investments for all (other) verticals rose 6.7% and 7.2% for seed and Series A, respectively.

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“Q3 marks the first signs of recovery for those industries bolstered by the pandemic, particularly cybersecurity,” explained the DataTribe team in a blog postOpens a new window . “This aligns with the dramatic shift in consumer and business behavior (i.e. remote work) that began in the second quarter. Cybersecurity deal activity is 52% off its more recent peak observed in Q1 2019 (53 total deals), but the Q3 increase is nonetheless significant. While adjusting investment processes to a remote work environment, capital in cybersecurity is both available and being deployed. This points to resilience in the cybersecurity investing landscape in the face of economic headwinds,” the team added.

As shown in the graph below, early venture investments in cybersecurity accounted for 19% of the total investments made.

The demands of an increasingly mobile workforce accessing the enterprise network, the explosion of video conferencing, and cloud solutions are posing more risks than ever before. CISOs know that in order to navigate the new digital world order, they need flexible and scalable solutions. “This bodes well for both investors and entrepreneurs and we expect the positive momentum to accelerate in the coming quarters,” says the DataTribe team. 

Fulton-headquartered DataTribe is one of the early-stage investors in cybersecurity and tech startups. Its portfolio includes industrial cybersecurity and intelligence platform, Dragos, Enveil, a data security company that delivers encryption of data while it’s in use, Attila Security, Previalion, Inertial Sense, CyberWire, Reform Labs, Strider, and BlackCloak.

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