A new report from DataTribe finds that venture capital funding in the first quarter of 2023 fell off a cliff, delivering results that haven’t been seen for nearly a decade.

The DateTribe Insights Q1 2023 report describes the first quarter as “grim” for most founders raising venture capital, including in what had been the red-hot area of cybersecurity. In the first quarter, levels were at or near decade lows and the downturn was seen across all stages of cybersecurity funding.

The number of deals across seed, Series A and Series B rounds in cybersecurity dropped to 21 in the first quarter, the lowest figure since the first quarter of 2015. Seed deal volume fell 56% year-over-year and 50% from the fourth quarter of last year. The report notes that despite the decline, the drop in cybersecurity VC in the quarter was less than the broader venture capital market.

Valuations in the quarter were also down at all stages except seed, with the notable exception of the $300 million Series D round raised by Wiz Inc. in February. The company raised funding on a valuation of $10 billion, a 54 times revenue multiple and up from a previous valuation of $6 billion when the company raised funding in late 2021.

Although the number of deals dropped, valuations for seed cybersecurity companies didn’t, ending the first quarter with a median pre-money valuation of $15.5 million, the second-highest amount on record and only slightly down from the previous quarter, which had a median deal valuation of $15.8 million. The median amount invested into seed-stage companies also hit a record high of $4.5 million in the quarter.

“These two data points are on the back of the slowest seed investment pace of the last decade and we have a new level of concentration in the cybersecurity innovation ecosystem,” the report notes. “Fewer companies receiving more funding at higher valuations is likely a good thing for the sector, particularly the enterprise [chief information security officer], which is already overwhelmed with vendors trying to sell the latest product.”

As VC investment in cybersecurity slowed, so did merger and acquisition activity, which dropped to its lowest level in 10 years. The number of cybersecurity businesses that went out of business in the first quarter was also well above historical norms and nearing an all-time high. The number of cybersecurity companies going out of business is attributed to the high cash-burn rate of venture-backed companies.

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