Securing the Right Investment for Your Cyber Startup – by William Kilmer, Managing Partner
Cyberattacks are one of the fastest growing issues facing companies across the world and they are increasing in terms of size, sophistication and cost. As the complexity and sheer number of cyber security threats continues to grow, so too does the number of companies created to protect organizations from these threats. By one estimate, there are more than 4,000 cyber security companies in existence today and as many as 2,700 are venture backed. Last year alone, more than $5.3 billion was invested in companies focused on solving cyber security challenges, nearly double the amount invested in 2016.
While cyber security spending by companies across the world is projected to reach $124 billion in 2019, that figure is dwarfed by the estimated $6 trillion in breach-related costs it is estimated we will face by 2021. Think about that for a moment. With a ratio of more than 45:1 of dollars lost to breaches to dollars spent, it’s safe to say that there is still plenty of room for new cyber companies to enter the market, raise money and solve the multitude of problems posed by cybercrime.
However, in order to succeed, these cyber companies need to be agile to meet the broad, complex and constantly changing challenges. Cyber companies that set out to meet these threats need to constantly refine what they do and address the problem with the correct set of solutions. If you’re a cyber entrepreneur, the right venture backing can help you with both your tactical and strategic challenges. Although raising venture capital in a frothy investment market like cyber security may be easier than in other markets, finding the right venture capital investor and partner is the crucial point.
Growing a business is about customer acquisition, finding the next opportunity and discovering the most effective way to engage with customers on a consistent and predictable basis. Despite the high demand for security products, the steadily increasing supply of vendors means that it’s often difficult to reach the right target customer. I recently sat with an old contact, a CISO. He gave me his new mobile phone number, claiming he recently had to change it because he was receiving more than 100 calls per week from cyber security vendors. To stand out from the myriad of vendors knocking on every possible customer door, cyber companies need a defined approach and a network that gives you access to the right buyer at the right level.
One of our recent investments experienced this when we helped them not only with refining their target customer and product positioning, but also with building relationships with CISOs on two different continents.
Delivering cyber security solutions strategically is also key for ensuring long-term value. I was recently speaking to another investor from the cyber market, who observed that at times it’s still difficult to know if a company with $5-10M in revenue will be successful in the long run. Because the needs for cyber security solutions are so broad, companies may find initial success in a niche area without creating a mainstream product that guarantees them long-term rewards. To set up a company for long-term success delivering real value add, partnerships that make sense and relationships with real potential acquirers demands a clear strategy and considerable effort.
Cyber VC at C5 Capital
At C5 Capital we are dedicated to helping entrepreneurs overcome these challenges and create that long-term value. As investors in the secure data ecosystem, we look at the confluence between cyber security, data analytics, and cloud infrastructure. We are focused on helping companies reach the inflection point beyond product launch and first customer and to scale the business with new customers and international expansion. Our unique network spans the US, UK, Europe, and the Middle East. We leverage this geographical reach and our strategic advisory board of cyber and national security professionals, as well as our market knowledge and contacts, to help organizations achieve bigger opportunities, partnerships, and long-term value creation and realization. By leveraging our broad cyber experience and international network, we can offer an extremely strong proposition.
Technology companies are continually looking to build advantage which gets them one step closer to closing the gap between problem and solution, and generates the most value, especially in competitive markets like cyber. At C5, we believe we can build on an organization’s capabilities to position them for both short-term and long-term success.
If you want to know more about what C5 can do for your company, contact us here.