Where are the smart bets in cybersecurity? Insights from 2025 investor trends

Generative AI is driving new attack methods, boards are scrutinising cyber resilience, and regulators are tightening data rules. But this year, investors aren’t being swayed by every shiny new security tool. They’re focused on disciplined bets, and backing categories with defensible tech and long-term need. 

Recent funding data shows where investor money is going – and where investors are pulling back. 

Funding has cooled, but remains resilient

Global security vendor funding dipped year-on-year in the first half of 2025, but it’s far from collapsing. A Q2 vendor funding report from Pinpoint Search Group shows overall deal volume lower than in the 2021-22 boom, but strong activity in certain late-stage rounds.

In a recent blog post, SG Analytics calls this a ‘strategic reset’: Q1 2025 saw about USD $3.3 billion invested in cybersecurity startups, with a marked preference for later-stage deals and higher median pre-money valuations compared with early-2020s averages. 

Using data from its 2025 cybersecurity investment monitoring report, Moss Adams reports roughly $5.1 billion in funding across the sector so far this year – a slower clip than the pandemic-era surge, but still robust.

Overall, investors are being more selective. They’re focused on growth-stage companies with proven revenue and sticky enterprise customers, while very early ideas aren’t being picked up for funding so frequently.

5 categories attracting significant investment this year 

1. AI-driven defence and detection 

Attackers are using generative AI to scale phishing, malware creation and social engineering. And that’s fuelling demand for defensive AI. Deals like ReliaQuest’s March 2025 raise (more than $500 million at a valuation of about $3.4 billion) show appetite for platforms that blend AI-enabled detection with managed detection and response (MDR).

2. Identity and access security

IBM’s 2025 security predictions highlight identity as the “new security perimeter”, as cloud and remote work stretch traditional boundaries. Identity fabric platforms, passwordless authentication and just-in-time access are high on buyers’ lists – and investors know it.

3. Continuous threat exposure management (CTEM) 

Continuous visibility and testing are overtaking once-a-year penetration tests. Gartner has flagged CTEM as a strategic priority, and funding has flowed to vendors enabling ongoing attack-surface discovery and validation.

4. Security validation and breach simulation 

Startups like Pentera, which automates attack simulation, continue to secure growth funding (the company reached unicorn status in 2022 and has continued to expand). These platforms give CISOs measurable proof of security posture – a narrative that investors like right now. 

5. Platform consolidation and supply chain security 

Earlier this year we wrote about why platform consolidation will continue throughout 2025. And we were right; enterprises want fewer dashboards but deeper protection. It’s worth noting though that KPMG’s 2025 guidance warns that aggressive consolidation carries risk; because bolting everything onto one platform can create blind spots. 

Supply chain security (boosted by new optimisation modelling research on spend and attack risk) is drawing investor attention too.

Investor behaviour is shifting 

In the blog post we mentioned earlier, SG Analytics notes that late-stage rounds dominate: investors prefer proven business models to early experimental bets. Median valuations have risen, but mostly for companies with clear revenue traction and enterprise expansion.

Exits remain a challenge. IPO windows are narrow, and M&A is the primary route. Still, strategic acquirers – big cloud providers and platform players – are active. Alphabet’s $32 billion acquisition of Wiz earlier this year is an example of the appetite for cloud-native security at scale.

Defensibility is critical right now, and can tip an investor’s decision one way or the other. Proprietary threat data, strong machine learning models, regulatory readiness and integration into enterprise workflows all help a startup pass diligence.

Investors are calm, focused, and know what they’re looking for 

There’s no sense of frenzy in cybersecurity investments this year. Instead, investors are focused. The headline numbers (about $5.1 billion year to date, according to Moss Adams) are solid, but the cheque-writing mindset has changed. 

For investors, this means more work to scrutinise defensibility and real-world adoption for jumping in. And for founders, it means proving traction early, solving enterprise-grade problems, and avoiding buzzword-only AI.

The smart bets now are on companies that make security measurable, manageable and future-proof – and investors are turning away from startups that add unnecessary complexity to the field.