UK cyber-startups have raised £496m in funding during the first half of 2020, already close to eclipsing the record £521m invested in these companies last year, according to the London Office for Rapid Cybersecurity Advancement (LORCA)’s new study, The LORCA Report 2020.
This is despite the economic uncertainties caused by the COVID-19 crisis, with cybersecurity startups raising £104m in the first two months of lockdown alone, a 940% increase compared with the same period last year.
However, the analysis revealed that just 1% of this money went to companies securing first-time funding. This means a funding gap is emerging due to investors focusing on growth-stage cyber-firms, which have received 94% of the funding so far in 2020.
This has been a worsening trend over recent years, with the number of deals across cyber-startups at the seed and venture stages standing at 52 in 2018, 39 in 2019 and just 21 so far in 2020. LORCA warned that this disparity is hampering the development of many innovative companies in the cybersecurity sector.
Saj Huq, program director at LORCA, commented: “The UK’s cybersecurity sector has grown tremendously in the last few years and has the potential to be right at the heart of our economic success. We have leading research institutions, technical innovation from startups and government-led bodies and growing engagement from investors and business leaders.
“However, the ecosystem is still nascent and obstacles remain to its continued growth. Access to funding for early-stage startups is clearly the biggest hurdle that must be overcome for the UK to compete on the world stage.”
UK digital infrastructure minister Matt Warman added: “It is great to see these new statistics. The tech sector will play a vital role in powering an economic recovery out of the pandemic and the cybersecurity industry plays an important role in keeping people safe online.
“We are backing our innovative firms to develop cutting-edge solutions and keep one step ahead of tomorrow’s security threats through our National Cyber Security Strategy.”
Yesterday, LORCA, a government-backed innovation program, announced the 17 scaleups selected to join its fifth cohort of cyber-innovators.