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NEW YORK (Reuters) – Venture capital investments in cybersecurity firms hit a record high last year amid a surge in cyber crime over the last few years, according to a report released on Thursday by U.S.-based Strategic Cyber Ventures.
Total venture capital funding in the space totaled $ 5.3 billion in 2018, up 20 percent from $ 4.4 billion seen in 2017.
“We’re seeing mega-breaches happening on an extremely frequent basis,” Chris Ahern, data scientist and principal at Strategic Cyber Ventures, told Reuters on Wednesday.
“I don’t think that’s going to stop anytime soon. And investors are seeing that as an opportunity for investment.”
Cybersecurity has become the focus for governments and corporations around the world as digital crime increases.
The latest quarterly data from cybersecurity firm ThreatMetrix showed that it detected 210 million attacks in the first quarter last year, with another 151 million seen in the second quarter. Compared with 2015, cyberattacks have surged more than 100 percent, illustrating an overall heightened risk landscape over the last two years, ThreatMetrix said.
U.S. cybersecurity firms took the bulk of investments, accounting for 46 percent of investments in 2018, according to the Strategic Cyber Ventures report. Asian and European companies took 22.6 percent of global investment, up from 12.7 percent in 2014.
“We’ve seen this trend in the broader tech ecosystem as well, with many large international funds and investment outside of the U.S.,” the report said.
“Simply put, amazing and valuable technology companies are being created outside of the U.S.”
That said, Ahern sees a bit of a pullback in investments for this year. “There is still a lot of money being put to work in 2019. I do think investors are a little bit weary, there’s a bit of vendor fatigue,” he added.
Asked about the biggest cybersecurity threat in the world, Strategic Cyber Ventures co-founder and chief executive officer Hank Thomas told Reuters that he considers the People’s Liberation Army — China’s armed forces — as the largest cyber threat actor in the world.
“They’re playing the long game. They have been able to use cyber to facilitate all sorts of things beyond just information warfare,” said Thomas, who is a former U.S. army intelligence officer focused on cyber, signals intelligence, information operations, and military intelligence planning.
Strategic Cyber Ventures has a $ 100 million portfolio that includes four cybersecurity companies.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Phil Berlowitz
This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Reddit co-founder Alexis Ohanian announced Wednesday that he would be stepping down from his daily role at the company (he will continue to serve on Reddit’s board).
Ohanian said he will return to Initialized Capital, an early-stage VC firm he co-founded with Garry Tan, as a full-time general partner. The firm has more than $ 250 million in assets under management, and its investments include Coinbase, Instacart, Zenefits, Opendoor, Soylent, and Cruise Automation.
Now, he plans to double down on investment opportunities in emerging technologies such as blockchain, and says the firm will participate in upcoming initial coin offerings.
“The threat that ICOs pose long-term are to VC firms that aren’t very good because the onus will be on investors to justify why founders should take their money and not use other ways to get it,” he told Term Sheet. “We’re up for that challenge.”
How do they plan to do this? Ohanian says his focus for 2018 is to roll out software that will automate some investment decisions. This may also increase deal flow diversity and help founders gain access to the firm’s network more efficiently.
“It’s a challenge for all of venture,” he said about investing in non-white-male founders. “We have to get it right. Believe me, I used to think about this before I had a black daughter, and I really think about this now on another level because it’s so personal to me.”
As we’ve seen with Social Capital’s “capital-as-a-service” platform, diversity improves when human bias is taken out of investment decision-making. For context, Social Capital evaluated nearly 3,000 companies during its private beta and committed to funding several dozen across 12 countries. CEO demographics skewed 42% female and majority non-white.
Though Ohanian wasn’t familiar with Social Capital’s data-focused investment platform, his response to the findings was, “hell yeah.” So why aren’t more firms fully embracing the data?
“It’s ironic because venture capital firms talk about investing in founders who are building the future and replacing file cabinets with software and yet venture is so technologically backwards,” he said. “That’s because very, very few people running these firms are product people.”
It looks like data-driven venture investing will only accelerate in the future. It remains to be seen how well quantitative recommendations are accepted in a world of big personalities and a strong belief in “the pickers.”
Chad Brown the trainer for Cloud Computing celebrates with the Woodlawn Vase after the horse won the 142nd Preakness Stakes horse race at …