Venture Funding of Cybersecurity to Rise to $400 Million as Threats from IoT Grow

With rapid adoption of Internet of Things in products ranging from connected cars to industrial workplaces, the need to secure cyberphysical assets is growing, Lux Research says

Lux Research analysts studied funding of cyberphysical security firms, notably by venture finance firms, and the startup environment. Among their findings:

U.S. is a runaway leader. The United States accounts for nearly half of the IoT security startups, while a third are headquartered in Israel. Together, 77 startups assessed by Lux have raised $808 million since 2000, with many receiving no venture capital funding.
Platforms a prime focus. More than half of the companies aim to provide horizontal security platforms capable of supporting multiple types of IoT devices and environments. Securing industrial control system networks is a huge initiative across the IoT security landscape while securing the connected car is also a hot spot.
Hot areas of innovation. Device behavior analysis, network behavior analysis, and combinations of the two approaches are especially active areas of innovation, according to an analysis of startups by the types of countermeasures being developed. Methods for performing authentication and encryption in IoT environments are also a major focus.

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Cybersecurity Startups Set For Surge

Venture capital investment in cyberphysical security startups rose 78% to $228 million in 2015, and will rise to S400 million in 2016 as rapid adoption of the Internet of Things (IoT) raises the threat to products such as connected cars, smart homes and future factories, according to Lux Research.

“What we have seen in the past is smaller venture capital investment, but that is set to change,” says Mark Bunger, research director of Lux. Air conditioning system and car manufacturers and construction/building companies will lead the fray, he adds.

“The threat will rise and there has to be more invested in the sector,” according to one investment banker, who calls cybersecurity one of the “fastest growing sectors” right now.

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