Cybersecurity has had a tough go of it recently, with funding within the sector dropping a precipitous 40% in comparison with the 12 months prior. However there are promising early, even preliminary, indicators of a restoration.
The overwhelming majority of chief info security officers reported greater budgets for 2024, in line with the cybersecurity-focused VC agency NightDragon. And, regardless of decrease general funding within the cybersecurity trade in Q1 2024, the variety of offers elevated in comparison with Q1 2023, per recruitment outfit Pinpoint.
It’s in opposition to this backdrop that Evolution Fairness Companions, a development capital funding agency primarily based in NYC, on Tuesday launched a $1.1 billion cybersecurity and AI fund, the third such fund in Evolution’s historical past.
The fund, referred to as Evolution Know-how Fund III, was oversubscribed, with participation from present and new endowments, sovereign traders, insurance coverage corporations, foundations, fund of funds, household places of work and angels. It’ll pursue investments starting from $20 million to $150 million in cybersecurity companies and startups leveraging machine studying and AI to construct “market-leading” platforms, Richard Seewald, managing accomplice at Evolution and one of many agency’s founders, instructed information.killnetswitch.
“The Evolution Know-how Fund III has already backed fifteen main cybersecurity corporations, initiating its funding interval over 12 months in the past,” Seewald mentioned. “We count on to put money into a portfolio of as much as thirty corporations within the current fund. We’ll work with administration groups and founders, offering them with assist and perception in areas together with gross sales and advertising and marketing, product expertise, human capital, M&A and enterprise improvement, actually enabling them to excel.”
With Evolution Know-how Fund III, Evolution’s technique will likely be to order round 75% of the $1.1 billion complete for early-growth-stage corporations, round 15% for later-growth-stage startups and round 10% for earlier-stage VC tranches, with investments to be made not solely in North America however in Europe and Israel, a hotspot for security tech.
“Our technique is to speculate that fund in a diversified portfolio throughout the totally different phases of maturity,” Seewald mentioned. “We consider that gives personal markets traders with diversified publicity to cybersecurity alternatives.”
ESG will likely be one other issue, in line with Seewald.
“Evolution is dedicated to integrating materials environmental, social and governance (ESG) standards in its funding processes and possession practices,” he mentioned. “We actively have interaction with our portfolio corporations creating numerous boards and management groups bringing assorted views to decision-making processes, lowering the danger of groupthink and enhancing accountability.”
Evolution, which has places of work in Palo Alto, London and Zurich along with New York, was based in 2008 by Seewald and Dennis Smith, who met whereas working collectively on the cybersecurity large AVG (now owned by Avast). J.R. Smith and Karel Obluk — the previous CEO and chief scientist at AVG, respectively — joined Seewald and Smith to start out Evolution after AVG went public.
Evolution’s 30-person groups manages round $2 billion in belongings and has backed 60 corporations thus far; its earlier fund was $400 million. Amongst among the agency’s extra profitable bets are Arctic Wolf (which is planning for an IPO), Talon Cyber (which is reportedly in negotiations with Palo Alto Networks for an M&A deal), Snyk, Aqua Safety, SecurityScorecard and Carbon Black.
