Will your cybersecurity startup raise funds in 2024?

Spoiler alert: we can’t actually tell you if your startup will raise funds in 2024. But you already know that. There are a vast number of variables involved, from the stage you’re at in business and product development, to your ability as an entrepreneur to communicate the value of your work, to whether or not you get in front of the right investors at the right time.

But beyond the specifics of your own offering, there are market factors which indicate whether or not 2024 will be a good year for cybersecurity investments. And it’s those wider market factors that we’ll look at here. 

How’s the cybersecurity market looking, overall? 

According to research by Gartner, corporate spending on cybersecurity is set to climb 14% next year, reaching USD $215 billion. Saket Kalia (Senior Software Analyst at Barclays) told Yahoo!Finance that the environment feels “more stable,” and cybersecurity and cloud networking stocks are worth watching in 2024. 

Unprecedented challenges and opportunities in the cybersecurity market mean that experts suggest rapid evolution is in progress. Geopolitical tensions are heightening the demand for high-level security operations, and emerging technologies – including, of course, AI – represent both new risks and new solutions.

The Global Cybersecurity Industry Outlook 2024 report by MarketsandMarkets details key changes ahead:

• Governments around the world are doubling down on efforts to create regulatory plans to manage the challenges of deepfakes – with aims to develop guidelines (and then laws) that will mitigate their harmful impacts on society.
• New regulations and laws worldwide will attempt to increase trust in generative AI within the cybersecurity space; driving accountability and reliability of AI-generated content.
• Organisations globally will expedite the transition from passwords towards passwordless security methods; using biometrics, hardware tokens, and advanced technologies.
• The role of CISOs in society will continue to become more important, as they lead the transition towards cyber resilience through proactive strategies and rapid response plans.

And we think that last point is particularly interesting for the development of the cybersecurity market. Increasingly, organisations across all industries recognise that cybersecurity is essential, and no longer an after-thought to tack on at the end of a strategy. So CISOs and cybersecurity thought leaders are moving into a more prominent position in global society – making the cybersecurity market a more stable bet for investors. 

So how much will VCs invest, and where will they focus their funds? 

In spite of growing recognition that cyber resilience is critical across industries, VC funding has been tepid in recent years, as investors have exercised caution within an uncertain landscape and a heavily saturated market. 

It hasn’t been an easy time for startups.

According to data released by Crunchbase in October, cybersecurity startups raised just under $1.9 billion in Q3 2023 – 30% less than in the same quarter in 2022. The challenging quarter came after a year of turbulence for the market; but as that Gartner data suggests, corporate spending on cybersecurity is growing – so a bounceback is possible in 2024. In fact, Gartner experts security services to account for 42% of all spending and rise by 11% next year. 

Uncertainty is the theme of the moment for the investments market in cybersecurity. But tentatively, the investment outlook is promising for tech in general, and for cybersecurity in particular. 

An annual survey by Universal Investments found that asset managers are optimistic about tech, and it dominates top investment themes for 2024 – along with pharmaceuticals. The survey cites cybersecurity-focused companies as particularly promising investments, with 45% of experts recommending them. 

And as organisations and governments work to enable AI adoption, AI-focused security startups will be well placed to attract funding. Security for AI is a key concern across industries – so innovators that offer efficient protection and reassurance to ease the transition will gain a competitive advantage. 

To sum up: when it comes to investments, we’re not in a period of clarity. But there’s plenty of space for optimism – and we’ll keep working to put the right startups in front of the right investors, in order to drive industry development and growth.