Cybersecurity start-ups saw a significant drop in funding in 2022, with venture capital in the sector falling by a third, according to data from Crunchbase.
While 2021 saw a record $22.8 billion invested in cybersecurity start-ups, that number dropped to $15.3 billion last year. The trend of declining investment in the sector continued throughout the year, with the fourth quarter seeing just $2.4 billion invested, the lowest amount since Q3 2020.
One reason for the drop in funding was the lack of large growth rounds being raised. While 18 rounds of more than a quarter-billion dollars were raised in 2021, last year saw only seven such rounds. These included Securonix, which closed a $1 billion-plus funding round led by Vista Equity Partners, and 1Password, which closed a $620 million Series C led by ICONIQ Growth.
The decline in large rounds of funding is not surprising, as large growth rounds are often the first to be affected when venture capitalists pull back on investing. The sector also saw a decline in deal flow, dropping from 862 announced rounds in 2021 to just 730 last year. This, combined with the declining trend of investments, could spell a tough year for cyber start-ups in 2023.