A Growing Problem and Fast-Changing Technology Landscape Equals Opportunity for Savvy VCs

A research study published in the Journal of the Association for Information Systems in 2016 found that, despite the real threats to businesses posed by cyber-security issues, people didn’t show a physical fear response to the proposed threats.

Which explains why so many employees are nothing more than annoyed when prompted to change their passwords.

But cyber-security threats are real. In 2014 it was estimated that hackers cost companies and consumers between $375 and $575 billion (yes, billion with a b), annually.

The need for cyber-security professionals is growing to such a degree that universities, like Temple’s Fox School of Business, are offer degrees in the field.  Steve Morgan, a contributor to Forbes wrote: “More than 209,000 cybersecurity jobs in the U.S. are unfilled, and postings are up 74% over the past five years, according to a 2015 analysis of numbers from the Bureau of Labor Statistics by Peninsula Press.”

Plus the world of cyber-security itself is changing. Sophisticated hacks, such as those that are state-sponsored or that come from organized crime, are on the rise. The technology to combat this shift needs to change with the times. The old-school firewalls and anti-viral software simply aren’t enough anymore.

An underestimated problem that, when it strikes, strikes big? A growing field of opportunity for job seekers and a market that can’t ignore the level and frequency of the threats? What does this mean for investors?

Opportunity.

With threat and need comes companies, and entrepreneurs, that will step up and meet the need. Those businesses and individuals need investors, and investors need to pay attention.

Which investors, exactly? GGV Capital Partner, Glenn Solomon, argues that it’s best if investment firms are already global in perspective. GGV recently invested $26.5 million in Alien Vault, which crowd sources information in order to detect and respond to risk. The company was founded in Spain, and is now headquartered in San Mateo, California, but its reach is global.

Because cyber-threats pay no heed to country or continent, investors need to be open to investment partners, and opportunities, beyond their own geographic borders.

My company Volta Global, a private investment group active in transformational venture capital, recently invested $2 million in FHOOSH. FHOOSH offers a unique, drop-in, software platform that helps organizations of all kinds protect and power valuable data at certified speeds up to eight times faster than storing data unencrypted.

Why look for companies like Alien Vault and FHOOSH? Because they meet the standards of smart venture capital investment 101— unique solutions to a significant and growing problem, and an all-star founding team.

The risk of excessive valuations is part of the cyber-security world, as it is in all tech sectors. But the risk can be mitigated if investors make sure that technology is sound and the solution unique to the company they’re investing in. (Or at least, not a solution that 1,000 other companies have in production.)

Also important, and not specific to the tech industry, is the need to evaluate the team and business plan the company brings to the table. Cyber-security may change rapidly, and evolve quickly, but a solid business plan should take that into account and be a multi-year proposal.

One more reason cyber-security is a great place to invest: corporate budgets.

In 2015, Fortune magazine reported that “Given the demand from banks, retailers, government agencies and hospitals, worldwide spending on information security technology is expected to grow from about $77 billion this year to $108 billion in 2019, according to research firm Gartner.”

With the recent attacks against companies ranging from Target to Yahoo, and leaks and breaches piling up daily in the public, private and political world, investing in cyber-security is as sure a bet as possible in an ever-changing world.

—Marko Dimitrijevic

Marko Dimitrijevic is a leading expert on emerging markets. An entrepreneur, investor, photographer, and public speaker, Marko is the author of Frontier Investor: How to Prosper in the Next Emerging Markets, which is available on Amazon

2017-06-19T15:35:45+00:00 April 10th, 2017|Blog|0 Comments

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