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Q1 marked lowest VC funding for security in a decade, but there’s a silver lining 

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Right now, DataTribe launched a brand new report displaying enterprise capital exercise within the cybersecurity trade dropped considerably in Q1 2023, following the collapse of Silicon Valley Financial institution. 

The report confirmed that though the cybersecurity trade skilled a much less dramatic decline than the broader U.S. VC ecosystem, cybersecurity deal exercise in Q1 was at or close to decade lows, with a median seed deal quantity of 21 in Q1 2023, in comparison with 20 in Q1 2015.

Likewise, year-over-year cybersecurity seed deal quantity was down 56%, from 48 offers to 21. Though, the report additionally famous that the seed-stage cybersecurity market remained “comparatively brilliant,” with a median premoney valuation of $15.5 million, simply behind the all-time excessive of $15.8M in This fall 2022. 

The brilliant facet to decrease VC funding

Whereas the general decline in VC seed funding seems to be a serious blow for the cybersecurity sector, the report argues that there’s an underlying silver lining: consolidation amongst resolution suppliers. 

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“Fewer firms receiving extra funding at larger valuations is probably going a very good factor for the sector, notably the enterprise CISO, [who] is already overwhelmed with distributors making an attempt to promote the most recent product,” the report mentioned. 

In an e mail interview with VentureBeat, John Funge, managing director at DataTribe, reaffirmed the report’s discovering and argued that “whereas the slowdown is painful in some circumstances, we see it as an total wholesome factor.” 

Funge prompt that bigger cybersecurity firms will be capable of reap the benefits of the market setting to make acquisitions and consolidate options whereas weaker firms wrestle to outlive. 

“The medium- to long-term advantage of this will likely be some rationalization of the highly-fragmented tech stacks that enterprises depend upon,” Funge mentioned.

One firm that seems for instance this strategy is cloud safety supplier Wiz, which regardless of the financial slowdown, managed to boost a $300M sequence D funding spherical and a $10 billion premoney valuation for an answer that consolidates cloud safety posture administration (CSPM) and cloud-native software safety platform (CNAPP) capabilities right into a single resolution. 

If Funge and DataTribe are appropriate that an financial slowdown will encourage rationalization within the trade, then it will seemingly be a net-positive for CISOs. They’ll have a chance to scale back complexity all through their tech stack and reduce the general variety of instruments wanted to safe their organizations’ environments.

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