VC Investment in Cyber Startups Surges 35%

Venture capital (VC) funds flowed in their billions to cybersecurity startups in the last three months of 2024, even as the number of deals fell, according to new data from PitchBook.

The capital market data specialist claimed in its Q4 2024 Information Security VC Trends report that $3.5bn was invested in the sector in the period, in North America and Europe.

That represents 35% year-on-year (YoY) growth and a 44% increase from the previous quarter.

However, the number of deals in Q4 2024 stood at 203 – down 11% from the previous quarter and 15% YoY.

“This suggests a trend toward larger but fewer deals, possibly indicating that investors are concentrating capital on higher-quality or later-stage opportunities,” the report noted.

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Overall, $13bn was invested by VC firms into cyber startups in 2024, up 8% from the previous year. However, the number of deals fell 13% annually to 910. The market has a long way to go before it hits the recent highs of 2021, when $28.1bn was invested across 1396 deals.

The market in general appears to be more risk averse these days, hence the move towards later-stage funding of more mature cybersecurity companies. Late-stage deals captured $5.1bn of investment in 2024 versus $2.7bn early stage, $1bn in seed stage and $4.3bn in venture growth, PitchBook said.

Interestingly, data security startups dominated last year, receiving $1.7bn across 27 deals, followed by endpoint security ($628m across 22 deals).

“This suggests that rising enterprise security threats and increased regulatory compliance trends shape investor priorities in the sector,” the report claimed.

A government report out this week revealed that dedicated UK cybersecurity companies raised £206m in 2024 across 59 deals – a 24% YoY drop in value and a 17% fall in the number of deals.

“Since 2022, external investment into private firms has reduced across sectors, as interest rates have risen, and as firm-level valuations have been revised,” the report noted.

“The research team noted the UK cybersecurity investment landscape is broadly similar to 2018/19 levels, which may reflect a ‘return to normal,’ rather than a significant loss of investor confidence or engagement.”