Emerging Themes in Cyber Security – 2021
By Renny McPherson and Dr. Josh Lospinoso
The cyber security landscape is evolving rapidly as the attack surface for cyber attack grows exponentially due to mega-trends in how people live today: more devices, more digital everything, more open source, more enterprises developing software, and everything digital being connected.
Covid’s work from home mandates have exacerbated the risk. As such, there are many opportunities for startups to have an impact by addressing a new, modern theme or taking a new approach to a long-standing cyber segment such as endpoint protection. Below, we outline eight themes of interest for First In this year. This list is far from exhaustive, as there are many segments within cyber security which present opportunity.
The Long Tail
Small and medium-sized businesses (SMBs) are increasingly at risk of cyber attack, and enterprises are more and more vulnerable to supply chain risk from their vendors and partners. Themes that have worked in enterprise are now more necessary, at a lower price point and with more ease of use, to SMBs.
We will devote a follow-on post to the long tail of risk.
Enterprises generate and retain massive amounts of data. It’s important to secure this data with a combination of filtering, blocking, and remediating techniques. Data security platforms will integrate directly with other data platforms to monitor, provide backups, and ensure compliance. There are a lot of incumbents in this space but we believe this is a growing segment.
We are keeping an eye on data encryption startups who are answering the call for quantum-resilient encryption techniques. While the technological problem clearly exists, companies are still working to find viable business models for their technological solutions.
We believe that data vaults are an investment opportunity in this space. If service providers host highly secure data and expose it as a service to customers, they can neatly solve several pain points at once. These so-called “data vaults” transfer risk to the service provider.
Major players in this space include Very Good Security, Evervault, and Skyflow.
Application & Composition Analysis
COVID-19 exacerbated the pressure on technology organizations to integrate security into multiple phases of the software development lifecycle. Over the next several years, teams increasingly will integrate security into their build phases. Startups in this space will offer tools to detect vulnerabilities in software dependencies and perform software composition analysis.
Major players in this space include Sonatype, Snyk, Whitesource, and Micro Focus. Phylum is an upstart taking a next generation approach. Rather than match known vulnerabilities against open source package versions, Phylum ingests terabytes of open source code and performs analysis to find unknown vulnerabilities, identify dependency risk, and mine for malicious activity. Earlier this year, First In led Phylum’s seed stage financing.
Application Security Orchestration and Correlation
While application security is a burgeoning industry, we believe there will be a major growth in the amount of tools available to enterprises. These tools will require integration and correlation. As this market will likely be fragmented, there will be startups rising to integrate the complementary solutions and improve end-user experiences. This market is poised to break out.
Emerging companies in this space include Code Dx and ZeroNorth.
Cyber insurance is still in its early days, with major insurance providers finding their footing in this essential market. In the race to maturity here, look for more news such as the recently announced partnership between Google, Allianz and Munich Re. With breaches rising every year and cybersecurity spending rising yearly too, a risk transference mechanism is necessary. Large insurance companies are not as well-suited to copy-pasting life insurance actuarial tables onto the cyber risk paradigm. As a result, this is a ripe market for small, nimble companies with strong risk assessment chops, to stand out.
We believe that a core problem in cyber insurance is information. Insurers simply have a difficult time quantifying risk. The insured, especially small and medium sized businesses, want to mitigate what they can and transfer the rest without thinking about it too much. We believe there’s a large market opportunity for companies to address both issues at once. By pairing cybersecurity assessments with insurance, the same entity can perform a service to the SMB (cybersecurity risk) and more accurately understand what they’re insuring. Finally, it becomes possible to price cybersecurity mitigations based on how they impact insurance premiums.
Emerging companies include Coalition, Cowbell, and Trava.
Unifying Security in the Cloud: CSPM, CWPP and GRC
As containerization permeates everything, cloud workload protection platforms will become essential additions to cloud access security broker offerings. This is a hot space with recent acquisitions by Palo Alto, McAfee, Cisco, CheckPoint, and Fastly. As Kara Nortman of Upfront Ventures hypothesizes, the “Rise of the Multi-Cloud” will be a core driver for cybersecurity tool demand. While 93% of enterprises intend to use a multi-cloud strategy, cybersecurity products aren’t built for a cloud-first world.
Caveonix created a single integrated platform for automated compliance, cloud security posture management (CSPM), cloud workload protection (CWPP)and governance in a hybrid and multi-cloud environment. First In led Caveonix’s $7M Series A in Q4 2020.
Identity and Access Management
Identity and access management manages permissions across an enterprise. It helps customers manage employee and customer identities and ensures privacy preferences and access provisioning safeguard sensitive services and data. This is a large and growing market
We believe that there’s a major opportunity for players to develop better rules management for IT and security teams. Currently this is an error-prone and labor intensive process.
There continues to be a major opportunity for evolving beyond passwords and multifactor authentication. Based on behavioral analytics and the device used for access, there are possible replacements such as Zero-Factor Authentication.
Major players in this space are Beyond Identity, Forter, Mati, JumpCloud, and Alloy.
New Approaches to Endpoint Security
Endpoints are remote devices that provide services and process data. These devices, like computers, phones, network gear, and servers, remain critical. This is a very established and large segment in the information security field, and we view this as very difficult for new players to penetrate as it is such a crowded field.
However, there are some subsegments that offer opportunity. Internet of Things and Operational Technology, for example, represent a new frontier of cybersecurity that we believe represents a huge opportunity.
We believe there’s opportunity in the Extended Detection and Response (XDR) space. This represents a potential next generation of endpoint security, where detection and response are automated. Startups with a superior product could challenge increasingly outdated antivirus solutions, and labor-intensive security information and event management software incumbents.