For those of us in the northern hemisphere, as mists and mellow fruitfulness give way to late autumnal chill, the days get shorter and dearly darkness descends. Such seasonal changes certainly aren’t applying to the security industry where it seems to be forever hotter than July. Especially when it comes to investment.
It is without doubt that 2015 will go down as the year when the security industry showed that the investment community was more than willing to put its money where its mouth was. As indicated by a number of firms big and small, in different stages of their professional development, the money men and women have regarded security as a place that delivers above average returns and have made their bets.
But what exactly are they looking for? Some big clues were given at a number of recent conferences in New York over the last few weeks. At the AT&T Cybersecurity Conference in Enrique Salem, Managing Director, Bain Capital Ventures gave a wonderful explanation not only of how his company regards the industry but what firms were in his sights.
The Time for Action
For Salem, the essential issue is to seek those firms which can enable their customer to stay ahead of the evolving threat. And that was not just in terms of technology. On the contrary: he indicated that he was looking at those who could articulate to customers that security and by association compliance registered largely at board level and not just the IT department. There were Salem argues, great reasons for this: in some firms security run costs were accounting for huge percentages of IT budgets. And this was beginning to change the working lives of executives. Salem said that he saw board members take security extremely seriously and allocate increasing amounts in security from what he called an ‘action perspective.’
These actions were likely to see a shift in how security was regarded within a corporate environment. That is from security existing in a silo, to it being sponsored at board level, embedded within business opportunities and then optimized within the enterprise of the future.
But before this state can be achieved, Salem there is some work for a lot of end user firms to do. He warned the assembled member of the audience that they should prepare for the fact that security tool efficacy decreases over time and that they may well find that security expertise is somewhat lacking.
But if Salem had to look a key themes, he would divide these into threats, orchestration and compliance. Were firms showing the required ability to solve problems that matters? Have they realized just how control has changed as regulation has become more complex. And this begged a question, said Salem, “response is not just about technology; it’s about how you communicate with the outside world.”
Keeping the Temperature High
From a vendor investment point, Salem made clear that going forward his company would be looking very strongly at those firms that built security with mobile applications. Security firms that could not just detect threats but solve business problems.
Fast forward a few days to a different event, but same city same perspective. What wren VC looking for in tech plays? At the NYME on 9 October, Johnathan Miller, Partner, Advancit Capital was keen to identify execution risks and where companies were getting momentum and value from investment. Though he conceded that there was s a general, visceral problem with valuations.
At the same event, delegates from the investment community challenged the notion that general IT stock valuations were overheated. One said that she was concerned at the number of companies who were investigating how to reach Series A funding before they were ready. In particular she was looking at those who had plans to fund for 18 months as a 12 month runway seemed not enough to make a difference.
Which brings it all back to Bain’s point about perspective and which firms were ready to make a leap into optimizing their structures and organizations. Whoever looks like they can help end users make this transition will gain VC dollar as much as customer orders. That’s what it takes to keep it hot.