Early-stage and state-led investments on cybersecurity firms are increasing exponentially. According to reports from the Big Four accounting firms which include EY, PwC, Deloitte and KPMG, the surge in cybersecurity investments is a direct result of rising cases of ransomware attacks, phishing scams and data thefts.
Ransomware attacks and phishing scams are correlated in a sense that they both are popular hacking methods utilized by modern hacking groups to breach internal database and servers of companies. Ransomware encrypts files and servers of corporations, paralyzing operations until a payment in bitcoin is processed. Phishing scams target high level employees in a corporation to steal financial information and use it to misdirect payments.
In late 2016, PricewaterhouseCoopers released a study entitled “Toward new possibilities in threat management” that explicitly detailed the rising trend of phishing scams designed to steal personal and financial information. According to PwC researchers, 38 percent of the survey respondents reported their experience phishing scams.
As a result, large scale corporations and organizations have begun to partner with cybersecurity firms to develop, implement and integrate sophisticated security systems to prevent ransomware attacks and phishing scams.
PwC researchers stated:
“To combat theft of user credentials, many businesses are adopting advanced authentication to replace all-but-useless passwords. This type of prevention has become a critical business requirement as exponentially more consumer and corporate information is generated and shared, and consumers expect that their personal data will be secured.”
Over time, as ransomware and phishing scams became more sophisticated and hackers learned to use complex hacking methods to breach into companies, the demand for cybersecurity services rose evidently. State-led organizations announced multi-billion dollar investments in cybersecurity firms and venture capital firms began to focus on innovative security system developers.
PwC noted that as ransomware and phishing scam cases increased, companies started to implement technologies such as hardware and software tokens (safeguards) and biometrics for the interests of general consumers. Companies and analysts discovered that software tokens were efficient in protecting identities and personal data, which are usually the targets of hacking attacks launched against large companies.
Richard Kneeley, PwC US Managing Director, Cybersecurity and Privacy, wrote:
“Identity has been at the heart of most every breach in the past two years. Many of these breaches have involved someone gaining access by using compromised identity, then changing their identity once inside the network to ratchet up access to data and systems by taking over a privileged account and in the process gaining unlimited access to the network, to systems and to data.”
In the past month alone, the NATO Communications and Information Agency announced a $3.18 billion investment on cybersecurity, a Dallas-based cybersecurity firm Armor secured a $89-million investment and Israeli cybersecurity firm Votiro raised $10 million in a successful IPO in the Australian stock market.
Additionally, in 2016, key players within the Cybersecurity industry including Intel’s McAfee landed multi-billion dollar acquisition deals, including TPG’s $4.2 billion offer to purchase McAfee from Intel.
At the time, TPG partner Bryan Taylor said:
“We have long identified the cyber-security sector, which has experienced strong growth due to the increasing volume and severity of cyber attacks, as one of the most important areas in technology. We see a compelling opportunity to invest in a highly strategic platform that is growing consistently.”
The Dallas-based firm Armor also noted that the company was able to secure a $89-million deal after searching for investors in a short period of 6 months.
Based on the current trend in cybersecurity and the explosive growth of the cybersecurity market, analysts expect to see a significant increase in investments for cybersecurity firms in the upcoming months.