Key Takeaways:
- The cybersecurity industry is rapidly expanding because the risks are so significant
- More unicorns with over $1 billion in valuation arrive every quarter
- All of these unicorns have some traits in common
- Identifying those traits gives startups a greater chance of success
The cybersecurity industry is rapidly expanding as criminals attempt to separate companies from their vital data. The result is a surge in businesses forming with the intent of creating cybersecurity solutions.
There’s a clear need for cybersecurity startups because new threats arrive every day. This influx of startups is creating more cybersecurity unicorns. This guide will look at the five traits all unicorns in the cybersecurity space have in common.
What Is a Cybersecurity Unicorn?
The word unicorn typically designates something uncommon, rare, or almost mythical. A cybersecurity unicorn is a startup that passes $1 billion in valuation during its funding rounds.
There’s a significant surge in cybersecurity unicorns, though, as the number doubled between June 2021 and June 2022 to reach a total of 59 companies. These numbers suggest a cybersecurity unicorn isn’t all that infrequent, although achieving a $1 billion valuation remains challenging for most industry participants.
Why Unicorns Are Becoming More Common
Unicorns aren’t becoming more common in most industries, but the cybersecurity space seems different. This industry remains in its relative infancy, so there isn’t as much competition as in other sectors. Other possible reasons include:
The Cybersecurity Industry Is Expanding
The cybersecurity industry was valued at $139.77 billion in 2021, but projections suggest it could grow to $376.32 billion by 2029. The COVID-19 pandemic created more significant security risks because of the increase in work-from-home employees, and those risks aren’t going anywhere. There’s plenty of room in cybersecurity for startups, which could create more unicorns moving forward.
New Threats Arrive Daily
The reason cybersecurity is expanding so rapidly is that new threats arrive daily. Cybercrime is a massive industry, and businesses of all sizes must stay up to date on the latest security options to keep their data safe. Security providers that address these new concerns will garner attention from customers and investors, improving their valuation.
Businesses Are More Aware of the Risk
Companies can no longer ignore the risks associated with cybercrime because they’re so prevalent. That fact alone drives some growth within the industry, as everyone from CEOs to IT teams is on board with identifying the risks and developing solutions to them. The result is greater value for cybersecurity firms that can solve issues for these companies.
Speculative Strategies
Investors are also taking notice of the cybersecurity industry’s growth. This increased attention is leading to investor speculation on the future value of cybersecurity firms, driving a rise in valuation. The caveat is that a company’s fundamentals don’t necessarily have to be strong to attract investor attention. These investors are looking for a payout based on stock prices, liquidity events, or IPOs.
These factors push more cybersecurity companies past the $1 billion valuation mark. Startups looking to enter the space should be aware of the increase in industry unicorns while focusing on the features all successful cybersecurity firms hold.
5 Features All Cybersecurity Unicorns Share
Success in the cybersecurity industry might seem incredibly common, but it’s far from easy. Looking at some traits all cybersecurity unicorns possess could point you in the right direction. These attributes include:
1. A Market Fit
There must be space in the area where the startup is creating its products. It’s challenging to sell your products when there isn’t a market fit because there likely isn’t enough demand. Developing a product customers want to buy is perhaps the most critical aspect of reaching cybersecurity unicorn status.
2. A Solution for Customers
The product the cybersecurity firm is marketing should identify a pain point and offer a solution for the company’s clients. Businesses worldwide have specific cybersecurity weaknesses they’d like to address, and successful startups can solve this problem for these businesses. The result is more market attention and, potentially, greater profits.
3. Some Differentiators
Whatever you’re selling should be different from what’s already available on the market. There’s no reason for a potential customer to purchase a cybersecurity solution from a startup when there’s already an established product that adequately solves the problem. Your product should offer something different to make it stand out from the rest of the cybersecurity crowd.
4. Traction in the Industry
Successful cybersecurity firms can gain some traction to grow to new heights. There are many ways to begin building momentum behind your company, but the gist is that potential customers need to notice what you’re doing and be intrigued by your products. Gaining traction often depends on how well you market the business to stand out from competitors.
5. Investor Attention
You won’t reach unicorn status unless you attract the attention of investors. The investors in this space will want to learn how you plan to address current and future cybersecurity concerns and may ask about the technology and methods you’ll use. You won’t get far without investor attention, making this step vital to your overall success.
Unicorns like Wiz and Snyk have leveraged their unique cybersecurity platforms into multi-billion-dollar valuations in a relatively short period. There’s still space for startups with a good idea and a unique approach, though, as investors believe this space will continue to grow for years to come.
Becoming a Cybersecurity Unicorn
There’s no guarantee your company will be the next unicorn in the cybersecurity industry, but developing a solution and attracting investor attention give you a chance. The entire process begins with an idea that solves an existing problem in a new way, since that’s what customers are seeking. From an investor’s perspective, identifying startups that offer solutions to significant cybersecurity problems is an excellent starting point when seeking a return.
Option3 brings startups and investors together in the cybersecurity space. We’re a private equity firm that aims to make significant returns for our investors while helping industry startups that will push cybersecurity forward. Contact Option3 for more information or tips on cybersecurity startups and investing.