Over 50% of the world’s population and 80% of developed countries’ population are users on the internet. As these numbers continue to increase, so does the amount of professional and personal data being processed online. It is seen that cyber-threats are becoming more frequent, complex and sophisticated, so keeping updated and informed is consistently more challenging for enterprise networks. Protecting the data and integrity of individual and organizational computing assets has never been more important or time-sensitive, and is one of the highest priorities for C-level executives, corporate boards and their teams. Driven by increasing threats and high profile, costly breaches (e.g. Equifax, the City of Baltimore, Yahoo, Uber), the cybersecurity market is expected to reach $170 billion by 2020.
Technologies Improving and Enhancing Cybersecurity
Data Privacy — the largest vertical now driven by regulation, not disruptive technologies
Data privacy has been the largest vertical within cybersecurity — $80 billion market size with an 15% annual growth rate. We believe the data privacy space will continue to grow due to increased corporate focus on securing data and new opportunities for innovation using AI, blockchain, and enhanced encryption technologies. However, the growth in the data privacy space is being fueled primarily by new regulations, rather than disruptive technologies. There has been little incentive for the development of disruptive technology because user behavior shows people care more about convenience and free services than privacy. New regulation is increasing the demand for compliance solutions, but solutions are largely built on existing technology rather than new technology. Successful startups in this area will offer solutions that fulfill compliance mandates, while not necessarily using massively disruptive technologies.
Software-Defined Networking — the second largest vertical and startups exit via acquisitions
Software-Defined Networking (SDN) and related applications has been the second largest and fastest growing vertical within cybersecurity — $42 billion in market size with with a 47% annual growth rate. SDN significantly impacts security and overall corporate technology spending. These networks make it easier to collect network usage information supporting the improved algorithm design used to detect attacks. The new generation of applications will take advantage of better-informed SDN to improve policy enforcement and traffic anomaly detection and mitigation. Today, a large percentage of the market is controlled by Series A to C SDN startups who produce the switches and gear necessary for SDN infrastructure deployment. Existing network operators and network equipment companies have responded by conducting acquisitions to bolster product variety and gain access to existing customers.
The industrial internet of things — an emerging and fast-growing vertical; blockchain may transform the industry
The industrial internet of things (IIoT) is an emerging and fast growing vertical — $2 billion market size with a 44% annual growth rate. Increasing adoption of IIoT devices significantly increases the attack surface and thus provides opportunity for more cybersecurity threats and attacks. IIoT security startups should aim to prevent and resolve security threats at various stages in the data flow. For example, the application of blockchain technologies can enhance security for the overall IIoT network while AI can provide security at individual device level.
Cybersecurity and Fusion Fund
At Fusion Fund we invest in companies that monetize core technical advantages in their business model on targeted sectors including connected industries (mobility, robotics), network technologies (security, connectivity), artificial intelligence (computer vision, natural language processing), and health tech (medical devices, AI in healthcare).
Within cybersecurity, we are investors in Neuvector, a company addressing real-time container security. As enterprises quickly move towards a container-based application deployment strategy across multi-cloud and on-prem platforms, enhanced security is required. Neuvector addresses this issue by delivering a complete run-time security solution featuring unique multi-vector visibility and protection, a container process monitor, and vulnerability scanner.
Additionally, we are investors in Nucypher, which builds cryptographic infrastructure for privacy-preserving applications and protocols, including blockchain, big data, cloud, and internet of things. The company’s core technology, proxy re-encryption is a type of public-key encryption that allows a proxy entity to transform ciphertexts from one public key to another, without learning anything about the underlying message. It is a means of securely delegating access to encrypted information, via the construction of cryptographically-enforced access controls.
We continue to be excited about the cybersecurity industry and are actively exploring areas such Data Privacy, SDN, and IIOT and the applications that technologies such as AI, blockchain, and IIoT will have on the industry.