Investors Cool on Start-ups that Promise Silver Bullets

2015 was a boom year for cyber security start-ups, but this started to come to an end in 2016. It is a very precarious investment area right now. Could this be due to the general downturn facing the tech industries? Or to a souring attitude towards the cyber defence sector? This seems odd given the increase of high profile hacks of major companies – JP Morgan Chase, Target, TalkTalk, FiatCrysler amongst others have all had their cyber defences breached. However even the infamous breach of the Ashley Madison database, where the names and details of adulterers were publicly leaked, pails in political importance when faced with the implications of the Clinton email fiasco, which was by far and away the most important hacking story of the last few years. So, why have these well publicised cyber security attacks not had a knock affect in the investment community? Why does investment keep dropping? On the one hand, general investment in start-ups is slowing in recent months. On the other, in terms of cyber security itself, a crowded market has meant many firms offer specific, focused responses – firewalls, antivirus products etc – but now, a “platform” based approach is being favoured. Value in cyber security is being found in companies that can offer all products, a holistic approach. Perhaps the cyber security start-up sector had been overvalued and under-performing, prime conditions for a bubble, and now there is a period of “correction”, where monopoly firms will start appearing out of the busy market. Given the political, economic and social implications of such cyber crimes – the insinuations made by the Trump campaign around Clinton’s capacity to keep America safe, that could have influenced voters, for example – perhaps the sector will see a significant boost.

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FT / Murad Ahmed