UPDATED 00:01 EDT / OCTOBER 19 2021

SECURITY

Cybersecurity VC deals were ‘less bouncy’ in the third quarter

Despite the overall venture capital market hitting record highs, a new report finds that investments in cybersecurity companies are currently seeing mixed results.

The DataTribe Insights Q3 report, released early Tuesday, found that although venture capital funding in cybersecurity was “quite active” in the third quarter and it remains a good time to raise money, a peak in the market may have already passed.

The quarter saw 822 seed deals across all sectors, down from a peak of 847 deals in the second quarter. Though not a huge decline, a decline was also reflected in Series A rounds, with the third quarter seeing 424 deals, down from 437 deals in the previous quarter.

Describing the third quarter as “less bouncy” in terms of cybersecurity deals, DataTribe, which calls itself a foundry for developing new cybersecurity companies, report found that there were only 16 seed deals in the sector in the third quarter, down from 25 in the second quarter. The numbers in cybersecurity deals are also significantly down from previous peaks of 32 deals in the first quarter of 2019 and 33 deals in the first quarter of 2017.

Despite news of cybersecurity investments and a rush to invest in early-stage companies across the tech market, the report suggests that the fewer deals may be related to increased valuations. It’s also noted that cybersecurity deals did not dip as much as the rest of early-stage investments in 2020, so they don’t have as big a recovery to make.

“The amount of capital invested in each round was found to continue to increase, although seed rounds are increasing at a slower rate than later stages,” the report notes. “With summer breaks and the boost in travel pent up by the pandemic, it’s easy to overlook a lot that has happened on the cybersecurity front in Q3. It was a busy quarter.”

Among other insights in the report: Record amounts of money continue to flow into venture capital funds, but even that came with a word of warning. “This is great news for entrepreneurs, though a market pullback could produce formidable challenges for founders that take money at inflated valuations,” the report said.

Image: DataTribe

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