Cybersecurity funding hits all time high in 2020

Investors pumped almost $8 billion into cybersecurity firms last year, according to Crunchbase.

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Continuing a decade-long run of high venture capital (VC) funding, 2020 proved to be a record year for cybersecurity investments with over $7.8 billion pouring into 665 deals globally. Driven by an increase in cybersecurity events during the COVID-19 pandemic, remote work, and companies moving operations online, cybersecurity funding in the U.S. increased 22% from 2019 to 2020, according to Crunchbase's Rise Of Global Cybersecurity Venture Funding report. 

In comparison, the overall U.S. venture market grew just 15% during the same period. The largest deal of 2020 was a $340 million Series G round for Netskope, valuing the company at $3 billion.

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"With cyberattacks continuing to threaten businesses and jeopardize personal privacy, cybersecurity remains not only a hot topic, but an imperative investment for any company, government or organization," the report said.

A record six new cybersecurity unicorns (companies valued at over $1 billion), were created in 2020. Five of the six are U.S.-based, with Cato Networks based in Tel Aviv. In 2021, nine new cybersecurity unicorns have emerged, surpassing 2020's record.

U.S. and Israeli companies accounted for 90% of all venture funding for cybersecurity companies in 2020, with U.S. companies raking in $5.9 billion or 76% of all global cybersecurity funding. Israeli companies received $1 billion. Companies based in the U.K. captured just over 3.0% ($262 million) largely due to an $80 million Series C round for data privacy company Privitar. 

While most companies receiving investment are based in the San Francisco area, there are pockets of opportunity across the country. New York-based companies raised $874 million (nearly 15% of all 2020 funding). Massachusetts-based companies claimed 12%, Texas companies got 7.0%, while Minnesota and Maryland each took in around 4.0%.

VC investor Accel was the most active seed round investor with 21 investments. Insight Partners invested in 17 companies, Techstars in 15, and Y Combinator made 14 deals. Two notable non-U.S. investors include Israel-based OurCrowd, with investments in 10 companies and Singapore-based Singtel Innov8, which invested in nine companies.  

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The exit value in 2020 for cybersecurity companies was $6.8 billion globally across 72

transactions. Most (70) were acquisitions and just two were IPOs. Virginia-based TELOS went public at $1.1 billion and British Columbia-based company Plurilock went public for an undisclosed amount.

VC interest in cybersecurity is expected to remain active in 2021, with over $3.7 billion already

invested globally. At the current pace, the industry would close nearly $15 billion in deals by the end of the year, the report said. Outside of cybersecurity, the sectors with the most VC interest are biotech ($45 billion), Fintech ($27 billion), real estate ($9 billion) and robotics ($8.6 billion).

About the report

Data includes seed, venture, corporate venture and private equity for venture-backed companies. All other private equity rounds were excluded. Valuations refer to post-money valuations. For cybersecurity, the report includes the following Crunchbase industries: cybersecurity, network security and cloud security.

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By Allen Bernard

Now a freelance business writer and journalist, Allen Bernard is the former managing editor of CIOUpdate.com, eSecurityPlanet.com, ITSMWatch.com, and EnterpriseNetworkingPlanet.com. Throughout his 20-year career, Bernard has focused on explaining the...