Evening Brief – 01.10.24      

Cybersecurity Fundraising Down 40% in 2023 

An annual report by Pinpoint Search Group, a U.S. cybersecurity recruitment firm, revealed an increase in the number of cybersecurity funding transactions in 2023 compared with 2022 but a decrease in the total amount of funding raised. 

Pinpoint Search Group’s research team reported 437 cybersecurity vendor transactions in 2023, totaling $8.7 billion over 346 investment rounds and 91 M&A deals. This marks a 14% increase in transaction volume from 303 in 2022, but a 40% decline in fundraising from $14.5 billion the previous year. 

A similar pattern emerged in the fourth quarter of 2023. The cybersecurity industry received $1.6 billion in capital in, a 45% decline from the $2.9 billion raised in the fourth quarter of 2022. Despite the drop in total funds, fundraising rounds increased by 21% in the quarter, climbing from 70 in the fourth quarter of 2022 to 85 in 2023, according to the report. 

The drop in total funding raised in 2023 can be linked to a shift in investor focus. Investors changed their strategies, investing a larger part of their assets into early-stage cybersecurity efforts. This is clear because the Seed, Series-A, and Series-B rounds accounted for a sizable portion of total funding, the report noted.   

Seed rounds, for example, accounted for 42% of all investment deals in 2023. This trend toward early-stage investments accounted for the increased number of funding transactions, despite a decline in total cash invested. 

Several other variables contributed to the reduced financing levels, which were influenced by broader economic factors influencing venture capital firm operations. These include the consequences of inflation and rising interest rates, as well as a market correction to correct prior years’ excessively high values.