Q1 marked lowest VC funding for security in a decade, but there’s a silver lining 

Today, DataTribe launched a new report exhibiting enterprise capital exercise in the cybersecurity trade dropped considerably in Q1 2023, following the collapse of Silicon Valley Bank. 

The report confirmed that though the cybersecurity trade skilled a much less dramatic decline than the broader U.S. VC ecosystem, cybersecurity deal exercise in Q1 was at or close to decade lows, with a median seed deal quantity of 21 in Q1 2023, in comparison with 20 in Q1 2015.

Likewise, year-over-year cybersecurity seed deal quantity was down 56%, from 48 offers to 21. Although, the report additionally famous that the seed-stage cybersecurity market remained “relatively bright,” with a median premoney valuation of $15.5 million, simply behind the all-time excessive of $15.8M in This fall 2022. 

The shiny aspect to decrease VC funding

While the general decline in VC seed funding seems to be a main blow for the cybersecurity sector, the report argues that there’s an underlying silver lining: consolidation amongst resolution suppliers. 

“Fewer companies receiving more funding at higher valuations is likely a good thing for the sector, particularly the enterprise CISO, [who] is already overwhelmed with vendors trying to sell the latest product,” the report stated. 

In an e-mail interview with VentureBeat, John Funge, managing director at DataTribe, reaffirmed the report’s discovering and argued that “while the slowdown is painful in some cases, we see it as an overall healthy thing.” 

Funge steered that bigger cybersecurity corporations will be capable to reap the benefits of the market surroundings to make acquisitions and consolidate options whereas weaker corporations battle to outlive. 

“The medium- to long-term benefit of this will be some rationalization of the highly-fragmented tech stacks that enterprises depend on,” Funge stated.

One firm that seems for example this strategy is cloud security supplier Wiz, which regardless of the financial slowdown, managed to boost a $300M sequence D funding spherical and a $10 billion premoney valuation for a resolution that consolidates cloud security posture administration (CSPM) and cloud-native software safety platform (CNAPP) capabilities into a single resolution. 

If Funge and DataTribe are right that an financial slowdown will encourage rationalization in the trade, then this may doubtless be a net-positive for CISOs. They’ll have a possibility to cut back complexity all through their tech stack and reduce the general variety of instruments wanted to safe their organizations’ environments.

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