The global COVID-19 pandemic has taken its toll on funding for startups in general. According to a report by Startup Genome, global venture capital (VC) funding is down 20% since December.
As a result, four out of ten startups are currently in a ‘red zone,’ which means they have three months, or less, of cash runway left.
On top of this, our recent shift to remote working has opened up a window for cyber criminals to take advantage of the reduced levels of security internet users now operate on from home. A recent Mimecast report puts levels of opportunistic cybercrime up by 33% over a three-month period from January to March.
Although this is bad news for users, it’s not the same for cybersecurity startups, who now need to respond to this problem. This means that cybersecurity investment funds still have the financial room to pour money into startups.
“This is a great time to invest in quality ventures,” read a recent report written by DataTribe founder Mike Janke, a global foundry that invests in cybersecurity startups.
Although he warned that deals might take a little longer to seal due to the current circumstances, Janke reassured that funding for cybersecurity is still available, and that investors’ selectivity could even mean that even more money could eventually become available.
In the meantime, now is the time for cybersecurity startups to begin to explore options.
Venture Capital
VC funding for cybersecurity startups has been slowly rising in recent years, culminating in close to $10 billion invested in the industry last year. Despite the circumstances, this year investors have shown no signs of slowing down these high-risk, high-return opportunities.
VC firms that are directly focused on cybersecurity investment funds include California-based TenEleven Ventures and ForgePoint Capital for early-stage companies.
Although not cybersecurity-specific, other venture capital agencies include Bessemer Venture Partners, Accel, Edison Partners, Citi Ventures, Dell Technologies Capital and Greylock. Although these could be more competitive, given that cybersecurity startups would have to compete with startups in other fields for funding, they’re also a great option.
Startup competitions
Although they require a little more effort and preparation, some of the best cybersecurity funds can often be won by startups in pitch competitions, in which startups present their business plans to a panel of judges — almost always investors — in the hope of winning investment.
In the United Kingdom, some of these competitions are even run by government institutions such as the Innovation Funding Service, which offers funding for a range of ventures, including UK academics in universities looking to commercialize their cybersecurity ideas.
Other, private initiatives include competitions such as the Industrial Control Systems (ICS) cybersecurity Conference — which offers cybersecurity startups a chance to pitch — will this year take place virtually. In October, the conference is scheduled to take place in Atlanta.
Incubators / Accelerators
Incubator and accelerator programs are great for young cybersecurity businesses looking to meet connections and make contacts in the industry, which could potentially turn into funding partners.
These platforms are perfect for cybersecurity firms who have all the right measures in place to be successful, but struggle to secure the funding they need. In these cases, incubators and accelerators can simply speed up the dialogues startups have been lacking.
For cybersecurity startups in Melbourne, accelerator CyRise is now accepting applications for the fourth cohort of their bootcamp program, which offers a $50,000 grant in addition to the mentorship and networking opportunities it advertises.
The UK’s first scaleup program for cybersecurity startups Tech Nation Cyber is also available to help early ventures from abroad as well as from the country itself. Offering benefits such as peer-to-peer learning and masterclasses from coaches, the program is free to join.
Other UK-based cybersecurity accelerators include the NCSC Cyber Accelerator, LORCA, Cyber39 and Cylon.
Bootstrapping
Although a bold move — and one that could possibly be more difficult given the current economic climate — some cybersecurity startups use their own funds to start off their business.
If they have personal savings or can afford to use low-to-0 interest credit cards, some entrepreneurs prefer to graft to raise the capital needed to boost their business.
With positives including control over the direction the business takes, ensuring the business will last longer and a sense of achievement, cybersecurity startups such as St. Louis-based Servlytics have managed to bootstrap their way to $2 million worth of funding this March.
Wrapping up
When it comes to funding for cybersecurity ventures, startups needn’t worry about securing it, because it’s out there. What they can focus on now is how to obtain this capital, decide which cybersecurity funds will work best for their business, and get applying.
When looking for external investment from VCs and accelerator programs, companies that leverage cybersecurity PR guarantee themselves to fare better when securing funding. Building credibility, fostering thought-leadership and demonstrating the unique value that your cybersecurity service offers can all be done through a comprehensive digital PR strategy, while growing your online exposure.
