Risk-management and security startups are in the spotlight among venture capitalists in the wake of increased remote work and a rise in high-profile cyberattacks.
And while current lockdowns and economic conditions may interfere with traditional deal making, a recent report tracking New York City-area startups reveals a surge of new funding.
Fourteen security and risk management companies in the region hauled in $675 million through June, according to enterprise-technology venture-capital firm Work-Bench, which tracks local startups.
“As a lot of organizations have been making the move to cloud, and paired with the fact that more people than ever are working from home, there’s an increased attack surface area,” said Jonathan Lehr, a Work-Bench co-founder and general partner, explaining the continuing interest in the sector.
These New York startups, which include BigID Inc., Payfone Inc. and BlueVoyant, offer software for cybersecurity, data governance and other risk-management functions.
Business interest in such technologies has intensified in recent years as companies seek ways to better manage risk-and-compliance issues associated with an explosion of user data, said Ram Jambunathan, a managing director of SAP.iO, the early-stage venture-capital arm of business software maker
“With data being basically the lifeblood of business now, it becomes critical to be able to protect that,” Mr. Jambunathan said. “CIOs, CDOs, CISOs all need to understand and know and be able to track and govern the different types of data that reside within their enterprise boundaries.”
SAP.iO invested an undisclosed sum in BigID, which sells privacy-management software, in multiple rounds between 2017 and 2019. BigID raised $50 million in January, and $144 million to date.
New York startups have the advantage of being in proximity to customers that are some of the largest businesses in the world, Mr. Lehr said. Such companies based in the region include AvePoint Inc., which raised $200 million in January; Payfone, which raised $100 million in June; and BlueVoyant, which raised $68 million last week.
The deals come in a year marked by a large-scale social engineering hack at
a European court ruling on data-transfer in Europe, and broad swaths of the labor force working remotely.
Rodger Desai, chief executive of Payfone, said his company’s software generates encrypted insights about phone numbers—such as how long a number has been associated with a person or a device—to help companies authenticate people. Mr. Desai said demand for his product by banks, insurance companies and others is being fueled by the need to verify identity without compromising privacy and convenience.
“They all need to have much more confidence that they’re interacting with people who are who they claim to be,” he said, “and they need to do that in a split second.”
Beyond the New York startup scene, the trend shows no signs of slowing down. Last week, Auth0 Inc., a Bellevue, Wash.-based provider of identity management software, raised $120 million.
Worldwide, startups selling information-security software and services raised $4.3 billion on 231 deals in the first half of this year, according to PitchBook Data Inc. In the same period last year, such companies pulled in $4 billion on 283 deals.
Deal value in the first half was driven by large investments in companies offering cloud security, application security, endpoint security and data privacy. They include cloud-security provider Netskope Inc., which raised $340 million in February, and fraud-prevention platform provider NS8 Inc., which raised $123 million in June.
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