Where Do Venture Capitalists See Security Opportunities?
VCs from Trident Capital Cybersecurity, Elephant, Glasswing Ventures and Ten Eleven Ventures discuss where they see the opportunity to profit.
There seems to be no shortage of new cybersecurity startups, and they all seem to want to raise money at one point or another. There is also money to be made in the cybersecurity market, with investors looking to back the next big thing.
At the RSA Conference last week, a panel of the world's top cybersecurity investors provided their views on the types of companies they like to invest in and where they see the market headed.
Sean Cunningham, managing director at Trident Capital Cybersecurity, said his firm is a cyber-only firm and has recently raised a new $300 million fund for security, looking to capitalize on the market opportunity.
Rick Grinnell, founder and managing partner at Glasswing Ventures, said that what has become clear in recent years is that the attack surface has expanded, with new devices and threat vectors.
"The expanded attack surface creates more opportunities for the bad guys," Grinnell said. "It also creates opportunities for us as investors to find companies that can better defend again new attack vectors like IoT."
He added, "there is a proliferation of devices that can't defend themselves, that need to be better defended."
Mark Hatfield, founder and partner at Ten Eleven Ventures, stressed that the importance of cyber security touches on all parts of modern civilization. Hatfield noted that a key problem he sees is a lack of security talent, which is why he's bullish on machine learning. The promise of machine learning is to get artificial intelligence systems to do more of the heavy lifting of security.
AI, he said "is a target-rich environment for investing."
Cunningham noted that in his view, hackers are ahead of defenders right now, which also creates a lot of room of investing opportunity.
"Lots of things in security can be solved with technology," Cunningham said. "So there is a huge opportunity."
Among the companies that Grinnell has invested in during his career is Reslient Systems, which was acquired by IBM in February 2016. Cunningham noted that among his investments are operational IoT security firm Bayshore Networks, mobile security vendor Appthority, and IronNet Data security, which is led by former NSA Director General Keith Alexander. Fundamentally, Cunningham said his firm is looking for product market validation.
"It's all about the real and practical aspects," Cunningham said. "At the end of the day, will this thing drive revenue?"
Grinnell agreed that reality and not just promises are a critical part of any investing decision. He said that his firm isn't interested in taking 'science risks,' rather there has to be a proof of concept and talent in place.
"People are the most important part of how we can create value," Grinnell said. "Technology is important, but the ability to trust people that can execute is critical."
Sean Michael Kerner is a senior editor at eSecurityPlanet and InternetNews.com. Follow him on Twitter @TechJournalist.