Cyber security funding tops $1bn after high-profile attacks

Cyber security start-ups raised more than $1bn for the first time in a single quarter as investors bet on them benefiting after several high profile attacks by hackers on large companies.

Venture capital firms including Andreessen Horowitz and Kleiner Perkins, as well as VC arms of banks and technology companies, are pouring money into the sector as they anticipate rapid growth in cyber security budgets.

Demand for these services are expected to soar after high levels of publicity for recent attacks on big companies from Sony Pictures to Home Depot.

Funding for cyber security companies hit $1.02bn in the first quarter, up from $540m for the first three months of last year and almost double the same period of 2014, according to data from private company research firm PrivCo.

This came on top of an already buoyant 2014, in which security start-ups hit $2.3bn in funding, up more than a third from the year before. Four years ago, total annual funding was less than $1bn.

Sam Hamadeh, chief executive of PrivCo, said the record levels of funding were spurred by ramped up corporate spending and predictions that smartphone security was becoming a serious problem for companies whose employees deal in sensitive data from their mobiles.

"Within cyber security, venture capitalists were most interested in mobile security, which was the most active subsector of the quarter for new venture fundings," he said. "Cyber attacks against enterprises have spread from the server and the desktop to the worrisome soft target of mobile phones, where not only files but stored passwords, emails, text messages, even actual phone calls could be spied upon with malware."

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Some of the larger cyber security start-ups such as Rapid7 and Veracode are prime candidates for initial public offerings, according to analysts and venture capitalists.

Since the quarter ended, Illumio, a start-up focused on securing data centres, has raised more than $100m in a round led by Blackrock, the world's largest fund manager.

Other large funding rounds this year include those of Tanium, which has developed a software enabling IT managers to roll out updates in seconds. It raised $52m to make it one of Andreessen Horowitz's largest ever investments after a $90m investment from the same firm last year.

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