Sep 19, 2019
| 6 min read
Trust is the basis for essential functions of commerce and society. With the explosive growth of connections, applications, communications, information and systems, threats continue to become more pervasive, driven by technological advances and growing involvement of organized crime and governments. As such, there’s growing need for security to facilitate e-commerce, electronic money transfers and modern conveniences such as ATMs. The IT security market is a dynamic market, conducive to startups offering fertile ground for innovators and investors.
Security is essential to establish and sustain trust in an increasingly hyperconnected world. With the surge in connections, applications, communications and commerce, information and systems remain increasingly vulnerable to threats. With the exponential growth of users, connected devices and applications, securing systems becomes increasingly challenging as architecture becomes more distributed. Threats continue to become more pervasive, driven by technological advances and the growing involvement of organized crime and governments. Given that cybersecurity is one industry whose fundamentals are likely to remain robust for the foreseeable future.
Criminals have used advanced technology for years and the future of cybercrime is exponential and automated. The growing prevalence and complexity of threats to data compel businesses and individuals to defend their devices, networks and information. Attacks are primarily motivated by financial gain as cybercrime has become a multi-billion-dollar pursuit. Security has become a sine qua non for anyone seeking to use the internet as vendors engage in an arms race with hackers. Regulatory mandates drive organizations of all sizes to implement policies to protect, back up and archive ever-increasing volumes of data. Proliferation of smartphones, tablets and other connected devices will drive the need for solutions that protect users and data.
Secular demand fueled by human-led innovation
The security market is enormously broad and complex, with hundreds of public and private companies offering solutions. There are so many startups that it can be difficult to keep track – various industry analysts that track the market have identified between 1,200-1,400 active companies. IT security is different from other technology sectors because demand is driven by external forces - human-led innovation. Whatever metrics one measures threats are getting more fierce, more difficult to detect, more difficult to combat and more numerous. The business of IT security will suffer only when the bad actors decide to go home and the likelihood of this is slim to none. For the foreseeable future, high-quality IT security vendors will continue to see strong sales.
A vibrant market for cybersecurity
Cybersecurity benefits from strong VC funding and M&A. According to Strategic Cyber Ventures, VC funding for cybersecurity increased 20% to $5.3 billion in 2018, an increase of 81% from 2016. According to an annual cybersecurity almanac published by Momentum Cyber, M&A deal volume hit a new high in 2018, with 183 cybersecurity M&A deals and 96% involving private companies. The public markets have been accommodating as well: in 2018 there were five cybersecurity IPOs in 2018 meanwhile, versus three in 2017, with the average IPO raising $364 million.
Market forecasts vary across different firms but security spending remains a top priority in corporate IT budgets. According to Statista, the global cybersecurity market is forecast to grow to $248 billion dollars by 2023 from $167 billion in 2019.
The impact of data breaches creates financial pain
The impact of attacks and theft of data is widely felt. IBM Security’s annual study examining the financial impact of data breaches on organizations found the cost of a data breach has risen 12% over the past 5 year and now costs nearly $4 million on average. Financial consequences of a data breach can be particularly acute for small and midsize businesses. Companies with fewer than 500 employees suffered losses of more than $2.5 million on average which can have a severe impact on businesses that typically earn $50 million or less in annual revenue.
An ever evolving challenge across the board
Cyber threats have become increasingly complex and financially motivated and security is an ongoing “arms race” between bad actors and security professionals. There are growing challenges involved in protecting private data, transactions and intellectual property. Trust becomes essential as more individuals and businesses rely on connected services online.
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