A new report from DataTribe reveals that venture capital funding for the cybersecurity industry for Q1 2023 has hit its lowest in a decade, following the collapse of Silicon Valley Bank. According to the report, the drop in cybersecurity deal volume was less dramatic compared to the wider U.S. venture capital ecosystem, but the average seed deal volume did fall from 20 in Q1 2015 to 21 in Q1 2023. Year-over-year, the seed-stage cybersecurity market fell by 56%, from 48 deals to 21.
Despite the overall decline, the median premoney valuation of the market still remained relatively high at $15.5 million, just behind the all-time high of $15.8 million in Q4 2022. In an email interview with VentureBeat, John Funge, managing director at DataTribe, explained that while the slowdown may be painful, he views this as being a positive force in the industry. He pointed out that fewer companies receiving greater funding at higher valuations will help reduce the complexity of tech stacks utilized by organizations while also decreasing the need to purchase separate tools to protect their environments.
An example of a company taking advantage of these conditions is cloud security provider Wiz. Despite the economic slowdown, the company managed to receive a successful $300 million series D funding round, including a $10 billion pre-money valuation for a solution that consolidates cloud security posture management (CSPM) and cloud-native application protection platform (CNAPP) capabilities.
For CISOs, the decline in VC seed funding could be a silver lining in disguise. With limited resources and a tightening of the market, CISOs can focus more on the quality of their tools and technologies to ensure their organizations’ security needs are handled effectively and efficiently.
