By Sean L. Cunningham
Cyber attacks are growing worldwide and targeting: F-100’s, SMBs and consumers, while disrupting business functions, stealing sensitive data and intellectual property. Juniper research recently predicted that the rapid digitization of consumers’ lives and enterprise records will increase the cost of data breaches globally to $2.1 trillion by 2019 increasing to almost four times the estimated cost of breaches in 2015.
It’s no surprise that global cybersecurity spending, which grew to $77 billion in 2015, is the fastest-growing sector in information technology. The drivers for the increase in cyber attacks are the monetization of stolen data and nation state attacks, which are intensifying. These drivers coupled with the ever-increasing attack surfaces (IoT devices, mobile devices, new applications, SaaS) will lead to a rising cybersecurity spend in all categories, segments and geographies. These key drivers and motivations make cybersecruity a highly attractive investment sector where Trident Capital Cybersecurity is solely focused.
Trident Capital Cybersecurity is investing in cybersecurity because of the increasing sophistication of cyber attackers and the rapidly evolving complexity of cybersecurity technology platforms. These intertwined trends make cybersecurity innovation imperative – a “must-have,” not merely a “nice-to-have” — and this enables highly innovative cyber startups with an enormous advantage. It is also a very multifaceted investment area that needs dedicated minds and experienced investors.
Trident Capital Cybersecurity has 2 Managing Directors besides me and one VP investing in early stage companies. Don Dixon co-founded Trident Capital Cybersecurity in 2015. He also founded Trident Capital in 1993 and built Trident Capital’s cybersecurity franchise since 1998. He is currently the lead director of Qualys (QLYS) and on the Board of Directors for IronNet Cybersecurity.
Alberto Yépez is also a co-founder of Trident Capital Cybersecurity and chairman of the board of AlienVault and Mocana and sits on the boards of BlueCat, HyTrust and Mojo Networks.
Will Lin is a Vice-President and joined Trident Capital Cybersecurity as an associate. He is a board observer for 4IQ, Bayshore Networks and ID Experts.
Our core investment team made 30 cybersecurity investments with 16 exits over the last two decades.
Today our investments focus in five areas of cybersecurity. The firm is targeting IoT investing because the first wave of the devices has minimal security features, creating substantial opportunity to address security vulnerabilities. Trident Capital Cybersecurity is also interested in investing in companies solving secure payments and fraud. This segment has enomous ROI potential due to the increasing financial losses created by the acceleration of fraudelent transactions associated with the ease of monitizing stolen data. Like most cybersecurity segments, there is no silver bullet to solve this “opportuntiy”.
Next-generation identity platforms, including startups that natively integrate firewalls with a security platform to prevent unknown cyber threats is the third market segment where the firm is investing. In addition, the firm will focus on startups involved in behavioral data analytics by utilizing complex behavioral models and data analytics to detect anomalous activity.
The fifth area of investment for the firm is privacy and security of individuals, especially inside corporations and government entities.
Given these investment areas of focus, we have funded five early stage companies: 4IQ, Appthority, Bayshore Networks, ID Experts and IronNet Cybersecurity.
As a sector focused fund, we have a targeted Industry Advisory Council that includes 45 blue-ribbon cybersecurity experts. They enable introductions to qualified entrepreneurs, go-to-market partners, co-investors, government officials and strategic acquirers. They also assist cyber entrepreneurs as they refine and implement their prototype technologies. In short, the Advisory Council opens the door widely for our pipeline entrepreneurs and portfolio companies with an intense cybersecurity expertise.
As a former corporate cybersecurity investor for Intel Capital, I believe corporate venture capitalists are positioned to provide significant partner synergies on cybersecurity deals. Entrepreneurs are looking for their investment syndicates to add value. From my 15 years experience as a corporate investor, it’s clear to me the resources, expertise, product/technology insights and sales channel opportunities a corporate venture capitalist brings to the table are substantial. The key to success is focusing these valuable assets to a deal and allocate appropriate doses of help as mutually beneficial. Because of the lopsided resources between a corporate investor and the startup, it can be counter productive to show too much “love”. Trident Capital Cybersecurity has a corporate venture investor partnering with us in the majority of our portfolio companies and will continue to utilize this collaborative model.
We believe we have captured the best in our cybersecurity investment thesis – a focus on a rapidly growing sector that favors innovative startup solutions, that addresses critical technology concerns for corporations, nation states and consumers. This segment will need joint collaboration between institutional and corporate investors to stay steps ahead of the adversaries.
Sean Cunningham is a Managing Director of Trident Capital Cybersecurity and sits on the boards of ID Experts, and Appthority. He was previously with Intel Capital for 15 years. Cunningham is also one of the industry’s top cybersecurity investors according to CB Insights.