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Cyber security, an investment opportunity for innovation

NewsFromThePlatform | February 16th, 2017

Over 1600 deals for more than $13 billion that have been invested since 2012. An estimated growth  of 700% over the next 10 years, and the creation of 2 million new jobs in the US alone. We are talking of cyber security, i.e. tech companies that offer products and services for the protection of digital (and physical) assets from unauthorized access and abuse by cyber criminals.

Watch out for cyber security start-ups

Analysts estimate that machine learning and artificial intelligence applied to cyber security will record significant progress over the course of 2017. In addition, there will be a consolidation of the information security market. Such a progress had already begun in 2016, which was a year full of interesting acquisitions (40 companies, of which 53% acquired by other cyber security companies) including BlueCoat Symantec and several acquisitions by Cisco, in addition to seeing the formation of the specialized security company NTT and the birth of a unicorn, the American Clyance.

2016 was also the year with the highest number of transactions involving Corporate Venture Capital operators, which totalled $1.6 million through 100 deals. In general, last year saw $3.582 billion funding and a total of 402 deals. 60% of these were early stage investments, demonstrating the fact that an increasing number of start-ups have only recently started to work in this compartment.

The importance of being cyber

Cybersecurity is indeed a serious matter: The Annual Cybersecurity Report by Cisco reveals that 22% of businesses that have suffered a cyber-attack have lost customers in the aftermath, 29% have experienced a reduction in revenues, and 23% have lost business opportunities. The report also analyses the way in which CSOs (Chief Security Officers) from 13 countries see the security issue. What appears is that the development of connected objects is causing an increase in threats and a consequent growth of the companies’ sensitivity to the matter. It is no coincidence that after suffering a breach, 90% of companies have invested their money in cyber security measures.

According to an analysis by the Research centre for cyber intelligence and information security of Sapienza University (CIS-Sapienza), in Italy, private companies as well as public administrations still need some education to cyber security. This is why the CIS has published a document, the National Framework for Cyber Security, which provides organizations with a consistent approach to dealing with cyber security, one that is intimately linked to risk analysis more than technological standards. “Several companies – small, medium and large ones – have expressed an interest for the Framework and have started to use it, but their number is still too small,” says Luca Montanari, researcher at CIS-Sapienza. This is due to their lack of risk awareness and to the financial commitment represented by security costs.

The Italian government has recently focused on cyber security, although it is still far from other European nations such as France, Germany and the UK, which have invested (at least) one billion Euros each. However, more legislative changes are due to arrive in Europe in 2018: in May, the EU GDPR (general data protection regulation) will come into force, which will impose strict penalties (4% of earnings or 20 million Euros) to companies that do not offer adequate protection for personal data, in addition to force them to give notice of any cyber-attack they might suffer.

All this can only lead to the development of a larger and more complex industry and to more competition between companies offering cyber security services. Just think that giants like IBM or Cisco Security are also involved and are growing even more through acquisitions. In a nutshell, this is a great time to invest in cyber security start-ups, especially in those systems that integrate artificial intelligence and security solutions.