Executives across industries may not agree on everything, but one consensus is that even in an economic downturn, cybersecurity is indispensable. “Nobody is fully prepared for cyberattacks, not even the most powerful nations on earth,” explains Bessemer Venture Partners investor David Cowan. “Even the stuff that we think has been solved has to be solved again, which is why cyber risk is job security for VCs.”
Yet, while cybersecurity companies attracted a frenzy of cash from VCs in the fundraising heyday of 2021, not all startups are created equal. “I get asked the question all the time: Is cyber under-invested or over-invested? My answer is yes; it’s both,” Bob Ackerman, investor at Allegis Cyber explains. “There's a lot of indiscriminate investing. At the same time, the next generation of technology is grossly under-invested.”
So, what differentiates a good idea from a great company? Ackerman explained that he looks for founders that have spent their entire careers in cyber with a special interest in those who have come out of the NSA or the Israeli equivalent, Unit 8200. “All of the innovation in cyber is actually paced by the offense,” he explained. “When you get to seed, there’s no revenue, there’s no product, and there’s no customers, so you’re really relying on [the founding team’s] domain expertise.”
We asked the top VCs in cybersecurity investing what companies they’re excited about this year that they have no financial ties to.
Ten Eleven Ventures investor Mark Hatfield pointed to ransomware defense startup Halcyon. Halcyon’s software both detects attacks before they happen and has designed a mechanism to defend against attacks while they are happening. Founder and CEO Jon Miller explained that what makes Halcyon unique is the technology’s ability to help software recover from an ongoing attack in real time. “These are the best-funded attackers in history. You have to be adaptable and realize that you’re going to get pushed over at some point,” Miller said. “The question is how do you recover from [the attack] quickly and reduce the impact from two months or two weeks down to five minutes.”
A.I. is exploding in popularity as chatbots and machine learning-powered products roll out across industries. Yet with A.I. innovation comes the next generation of A.I.-powered cyberattacks. HiddenLayer, the startup nominated by Syn Ventures’ Jay Leek, aims to address the rise in machine-learning cyberattacks with its software.
Read the rest of the list here, and see what startups VCs nominated within their own portfolio.
Lucy Brewster
Email: lucille.brewster@fortune.com
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