Venture Capital Investment in Cloud Security is Healthy

With the continued threat of cyber crimes together with an increasing demand for cloud services, there is expected significant growth in the cloud security market. According to IDC, cloud security accounts for 50% as an area of immense growth in the security market as more enterprises see the cloud security adoption as a viable need to address security and network concerns. Allied Market Research’s (AMR) “World Cloud Security-Market Opportunities and Forecasts, 2014-2020” observes significant increase in the adoption of cloud security services and the segment is expected to grow at a CAGR of 25.7% by 2020. The growth is anticipated as the constant exchange of data between cloud users creates an increasing concern of susceptibility to security breaches.

As protecting the virtualization environment becomes more of a necessity, companies offering cloud security services are taking advantage of this growth opportunity. As a result, venture capital investment in cloud security market is healthy, as illustrated in the matrix below. Although the venture capital market has been challenging for most startups, thriving cloud security companies have been immune to the downturn. Below is a sampling of cloud security market, where several of the more popular firms have altogether raised approximately $1.4 billion:

Startups Year Started Seed/Other Series A Series B Series C Series D Series E/Other Total (in M)
Cato Networks 2015 N/A 20 30 N/A N/A N/A 50.0
Distil Networks 2011 2 10 21 N/A N/A 5 38.0
PerimeterX 2014 N/A 12 N/A N/A N/A N/A 12.0
AlienVault 2007 2 4 8 22.4 30 52 118.4
BioCatch 2011 1.6 10 N/A N/A N/A N/A 11.6
CloudFlare 2009 N/A 2.1 20 50 N/A 110 182.1
Damballa 2006 N/A 2.5 6.36 9 12 28 57.9
Fortscale 2012 16 N/A N/A N/A N/A N/A 16.0
Zscaler 2008 N/A N/A N/A 38 85 25 148.0
Zenedge 2014 N/A 3.5 4 6.2 N/A N/A 13.7
Shape Security 2011 N/A 6 20 40 25 N/A 91.0
Bromium 2010 N/A 9.3 26.5 40 40 N/A 115.8
ThetaRay 2013 N/A N/A 10 15 N/A N/A 25.0
StackPath 2015 N/A N/A N/A N/A N/A 180 180.0
PhishMe 2011 N/A 2.5 13 42.5 N/A N/A 58.0
SafeBreach 2014 4 15 N/A N/A N/A N/A 19.0
Cylance 2012 N/A 15 20 42 100 N/A 177.0
Bay Dynamics 2014 N/A 8 23 N/A N/A N/A 31.0
Darktrace 2013 N/A 18 22.5 64 N/A N/A 104.5
SecurityScorecard 2003 2.2 12.5 20 N/A N/A N/A 34.7
27.8 150.4 244.36 369.1 292 400 1483.7


With the proliferation of cloud security startups or companies that are now offering cloud security services in their lineup, these companies represent different niches in the cloud security market.

Cato Networks, a cloud-based network security platform-as-a-service (PaaS), recently raised $30 million in a Series B round. They offer next-generation firewalling, encrypted VPN access, WAN security, application control, and URL filtering, protecting both traditional WAN and mobile devices. Their cloud-based platform is clearly following the success of Zscaler, the cloud security industry’s first which now totals $123 million as of Sept 2015.

SafeBreach which just secured a $15 million Series A round, uses “attack simulator scenarios” to find vulnerabilities in their security validation platform. By setting up a collection of simulators both inside and outside the client’s network, they create models mimicking malware behavior to help users identify which assets and services are at the risk. While SafeBreach offers a unique niche to the cloud security market, there will be more companies that offer innovative approaches to malware-based detection that isn’t based on endpoint security.

Advances in machine learning will continue to proliferate in the cybersecurity field, as AI investments accounted for roughly 5% of all VC activity in 2015. Cylance, the first cybersecurity firm to have an AI-powered antivirus, received $100 million during a Series D funding in June. With malicious malware protection, they collect malware samples to build and enhance mathematical algorithms to prevent malware execution at the endpoint. Meanwhile, other new startups are catching up and introducing AI to their products as Zenedge raised $6.2 million back in June as a Series C funding to further develop their patent-pending AI-based web application firewall (WAF). This increased adoption of using AI will encourage more startups to follow pursuit.

Digiprove sealCopyright secured by Digiprove © 2016