Creating a cybersecurity startup can be highly lucrative, although a lot has to go right to reach that stage. You could develop an industry-altering product that checks all the boxes required for growth, but you’ll still need outside investment to reach the next level.
Determining what investors are looking for in a cybersecurity company is a good starting point as you enter the market. Savvy investors understand that success requires more than a product and will look at the startup as a whole before determining if it has enough potential to back.
Learning precisely what investors want to see can direct you from your earliest stages of growth through your initial public offering. This guide discusses how to create a cybersecurity startup from an investor’s perspective.
Reason to Create a Cybersecurity Startup
The first step for any startup is deciding on an industry. Nearly every company on the planet needs a cybersecurity strategy, making this industry a popular choice for entrepreneurs. Some reasons for building a cybersecurity startup include the following:
Cybersecurity is already a massive market projected to reach $162 billion by the end of 2023. That number is up from its $83.43 billion valuation in 2016, suggesting that the industry isn’t showing any signs of slowing down. Companies that develop a product that businesses value could succeed in cybersecurity.
Tremendous Growth Potential
Estimates predicting the cybersecurity industry’s growth are all over the place, possibly because there’s no telling how much further technology will take us. Research by Statista suggests the market could grow to $256.5 billion by 2026, while McKinsey & Company believes cybersecurity could eventually become a $1.5-$2 trillion industry. All estimates point to significant growth, though, opening the market up for startups.
Multiple Ways to Enter
You’ll find many ways to enter the cybersecurity industry because it’s so dynamic. Cybercriminals constantly develop new methods of infiltrating systems, creating new problems for startups to solve. Cybersecurity is also a broad term, and you can narrow it down to segments like critical infrastructure, industrial controls, operational technology, cyber risk assessment, and zero trust once you determine you want to get involved.
There has never been a better time for startups to enter the cybersecurity industry, assuming they match what investors seek. Ensuring you understand how to create a cybersecurity startup is the next step in the process.
Seven Steps Cybersecurity Startups Can Take to Drive Interest in the Company
Successful investors aren’t in the habit of throwing their money at projects with little chance of paying off. Your cybersecurity startup must match what investors are looking for as you seek funding to reach the next level. Some steps investors might want to see you take include the following:
1. Obtain the Necessary Certifications
Many investors will want to ensure you understand the industry. Your experience could include a lengthy work history, but certifications could also help persuade potential investors that you know what you’re doing. Plenty of institutions offer cybersecurity certifications that give you something tangible to present to any private equity firms you approach.
2. Develop a Focused Business Plan
Your business plan provides a blueprint for your startup, including the company’s strategy, objectives, structure, and budget. Investors will want to see this plan, so it should include information specific to the cybersecurity industry and an overview of the products you plan to offer. You’ll also want to identify competitors and differentiate your firm from them in this plan.
3. Define a Target Market
Your cybersecurity startup should have a specific focus. The term cybersecurity is broad, so you’ll need to identify a particular segment you’re targeting and create a plan for taking market share away from competitors in the field. Investors want to know where you see the company heading before they put up any funds.
4. Identify a Specific Problem
Any cybersecurity startup entering the industry should identify an area requiring a new product to keep people and businesses safe online. You don’t want to compete with established companies while offering a similar product, so your creation should provide a fresh take on the issue. The good news for startups is that artificial intelligence and machine-to-machine learning are creating a new set of problems that will require solutions.
5. Create a Solution
The solution you create for the cybersecurity issues you identify should also be a fresh take on the subject. Companies experiencing a particular cybersecurity shortcoming have likely tried what’s already out there, so your product should offer a unique solution to the issue.
6. Hire Quality Employees
Pay careful attention to the people you’re hiring. Investors don’t want to be associated with problem employees, particularly those involved with criminal behavior or who express controversial opinions online, so vetting everyone working on the project is essential. You don’t want your funding to fall through because you failed to examine a worker’s history.
7. Focus on Leadership
The startup’s leadership is paramount as you seek investors. Building a cybersecurity startup that ultimately succeeds will require strong leadership and a vision, and investors understand the importance of those in charge. You don’t necessarily need significant business experience, but it’s a good idea to hire or partner with someone who does if you’re lacking in that area.
Successful investors know what they’re looking for in a cybersecurity startup, so meeting as many of these criteria as possible is advisable. Making yourself attractive to private equity firms can give your startup the credibility and funding it needs to succeed.
Where to Find Investors
Building a cybersecurity startup will likely require investors, and the first step is to make your firm as attractive as possible to them. It also helps to know where to find private equity firms, particularly those focusing on the cybersecurity industry.
Option3 is a cybersecurity private equity firm with a portfolio including early stage, growth, and buyout deals. Our experienced technology board vets every investment we make and understands what the cybersecurity industry will require in the next five years. Contact Option3 to learn more about cybersecurity investment.