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  • 💰 Security, Funded #130 - Who's Thriving in the Cyber Arena? 📊

💰 Security, Funded #130 - Who's Thriving in the Cyber Arena? 📊

Insights for the week of February 5, 2024

Author

Mike Privette
February 12, 2024 • Reading Time: 9 minutes

Security, Funded is a weekly deep dive into cybersecurity funding and industry news, captured and analyzed by Mike Privette.

Hey there,

Happy Monday, and I hope you had a great weekend! In this issue, we’ve got:

  • 🚀 Funding Surge

  • 🤖 AI's Ascendancy

  • 💰 Earnings Season is Upon Us

  • 1️⃣ Fun with Numbers & Ransomware

We are in the [cyber] arena (trying stuff) after last week’s barrage of public earnings calls (Some will work, some won’t. But always learning). The polarization of 2024 continues as stocks, funding, and M&A activity continue to fly high.

Onward to this week's issue.

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Last issue’s vibe check:
Are you building or using AI tools, frameworks, and workflows to improve your security work? 
🟩🟩🟩🟩🟩🟩 🤖 Yes, I, for one, welcome our robot overlords (41)
🟨⬜️⬜️⬜️⬜️⬜️ 🙅‍♂️ No, it's not allowed where I work (13)
54 Votes

Overwhelmingly, people said that, yes, they were using AI in some form to support and augment their security work. This is probably not a surprise to anyone reading this, but I imagine these numbers would have looked very different a year ago. Some of the top comments were:

“You can't stop it so may as well welcome it”
“Immense time savers. Yet still ruled by the garbage in, garbage out axiom.“
“beep boop” (lol, I assume an LLM wrote this)

I think there are some really obvious areas in security where this makes sense, and the places I’ve found the most value in my consulting work have been using AI in areas outside of security that make my job securing a company easier. Things like dissecting state laws or codes in human terms to know where to apply security, giving thoughtful challenges to the (sometimes) aggressive security requirements in contracts that companies get, and creating better internal documentation.

🔮 Earnings Reports

A section for notable earnings reports from public cybersecurity companies, be they “pure play” or hybrid companies.

  • Check Point Software ($CHKP) - Check Point reported a solid performance with a 4% year-over-year revenue growth, a 15% increase in subscription revenue, and a 14% increase in EPS, marking the highest since 2011. Growth was primarily driven by its Infinity platform. The earnings call was shorter than many and mainly focused on why the current CEO, Gil Shwed, decided to announce his transition to Executive Chairman at this time.

  • Fortinet ($FTNT) - Fortinet finished 2023 with 8.5% growth in total billings on the back of its Secure Access Service Edge (SASE) offerings and improvements on the SeOps front. Like every other company right now (not just in cyber), Fortinet attributed much of its success to significant investments in AI. From Fortinet’s standpoint, the math looks like this:


    More AI Usage + More Cloud Services + More Network Traffic + More AI Attacks =
    More Need for Firewalls and SASE Services

    This report was welcome news to investors after Fortinet saw a 25% drop in share price in Q2 2023 and a 12% drop in Q3. After the Q4 results, shares jumped 6%.

  • Qualys ($QLYS) - Qualys wrapped up 2023 with a 10% increase in revenue, a 47% EBITDA margin showing strong operational efficiency, and some new product innovations with the launch of Software Composition Analysis and First-Party Software Risk Management solutions. The vibe of the call was one of cautious optimism, even with questions about growth and sustainability on the reported numbers. Mord broadly coming out of this call, investors weren’t quite so sure, and the stock fell 10.1%.

  • Rapid7 ($RPD) - Rapid7 ended 2023 on a high note, with $806M in ARR, a 13% increase over the previous year, and a 14% jump in revenue to $778M. This performance was a result of a few things: 1) their investments in security operations and the managed SOC ecosystem, 2) more of a focus on acquiring larger accounts and large deals per customer, and 3) an operational improvement from the Reduction In Force (RIF) that they did last year. Shares jumped >8% as a result.

  • Tenable ($TENB) - Tenable ended 2023 with a 16% year-over-year revenue increase and a 14% growth in Calculated Current Billings (CCB) to $271.6M, driven by strong demand for its unified exposure management platform, alongside significant contributions from OT, Cloud, and Identity solutions. Tenable also saw increased performance in the mid-market, a place where many of its competitors (some of whom are listed above) did not show as much progress. Tenable’s stock jumped >8% as a result. Interestingly enough, the earnings call was on Feb 6, and then Tenable laid off 5% of its staff on Feb 7. 🤔 

📸 YoY Snapshot

A rolling 12-week chart to compare funding and acquisitions each week in a year-over-year (YoY) view between 2023 and 2024.

As this is a new year, this chart will be building over the next 12 weeks and then roll forward.

Funding rounds last week showed a stark difference in volume, with far fewer transactions this year than last but an almost 54% increase in the dollar figures. The average funding by week so far this year is 6% higher than in 2023 during the same timeframe.

High-profile acquisitions continue on their upswing as the first week of February 2024 lands. This M&A spree is only matched by the new company spree driven by AI Security efforts.

💰 Market Summary

  • 9 companies raised $321.4M across 8 unique product categories from 4 countries 

  • 6 companies were acquired or had a merger event for $750.0M across 6 unique product categories

🧩 Funding By Product Category

  • $232.2M for Managed Security Services Provider (MSSP) across 2 deals

  • $40.0M for IT Asset Management (ITAM) across 1 deal

  • $15.0M for Attack Surface Management (ASM) across 1 deal

  • $12.0M for Fraud and Financial Crime Protection across 1 deal

  • $10.2M for Security Operations across 1 deal

  • $9.0M for Identity and Access Management (IAM) across 1 deal

  • $3.0M for Distributed Ledger Technology (DLT) Security across 1 deal

  • $20.0K for Data Protection across 1 deal

🏢 Funding By Company

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🌎 Funding By Country

  • $265.7M for the United States across 6 deals

  • $40.0M for Malta across 1 deal

  • $15.0M for Israel across 1 deal

  • $700.4K for Lithuania across 1 deal

🤝 Mergers & Acquisitions

📚 Great Reads

  • Ransomware Payments Exceed $1 Billion in 2023 - I love a report with lots of charts and data (duh), and this one doesn’t disappoint from Chainalysis. This report breaks down the economics and the players involved in the ransomware gang from 2022 and 2023.

  • AI, Deepfakes, and Phishing - Clint Gibler from tl;dr sec has a curated round-up of all the AI and LLMs being applied to deepfakes and phishing to date.

  • Cybersecurity Market Update: January 2024 Insights & Trends - Dive into Return on Security's January 2024 cybersecurity market trends, cybersecurity investments, major acquisitions, and global insights. Lots of new charts and open-source data in here, too!

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