Cybersecurity Funding Ticks Up Despite Slow Deal Flow

After successive quarters of decline, venture funding to cybersecurity startups nudged up in the first quarter 鈥� and could see even more investment after having the largest acquisition of a private, venture-backed company ever.

Total funding to VC-backed cybersecurity startups topped $2.7 billion in Q1, per 小蓝视频色情网页版 . That鈥檚 a 29% increase from the last quarter of 2024, and just a slight dip from the $2.8 billion raised in the same quarter last year.

Deal flow, however, was down significantly. The first quarter saw only 139 deals consummated, a 31% decline from the more than 200 completed in Q1 2024 and down slightly from the more than 150 announced in Q4 2024.

Big exit help?

The increased dollar figure occurred in the same quarter as the largest acquisition of a venture-backed company ever: parent 鈥檚 planned purchase of cloud security unicorn for $32 billion.

It鈥檚 easy to assume the massive exit will draw even more investors鈥� eyes 鈥� and checkbooks 鈥� to the cyber space.

鈥淚鈥檓 sure investors are scrutinizing how they could replicate Wiz鈥檚 success 鈥� and evaluating exactly what key factors set it apart,鈥� said , a managing director at who specializes in cyber, cloud and AI infrastructure.

Padval said one significant trend driving interest in this space is AI, and more specifically, agentic AI.

鈥淚t has the potential to make cybersecurity professionals more effective, streamline operations and reduce the time to resolution of critical hacks within enterprise security operations centers,鈥� he said. 鈥淎utomation is emerging as a critical solution in these environments.鈥�

Padval expects the sector may see a leveling off in the number of startups but a rise in disruptive new broad cybersecurity platform startups along with established companies expanding their offerings, ultimately creating larger, more dominant players.

The most recent quarter certainly saw some large growth rounds go to highly valued firms.

In February, , which provides endpoint management, security and monitoring, raised $500 million in Series C extensions at a $5 billion valuation 鈥� more than doubling its value from just 12 months ago. The company said the new funding came in separate tranches led by and 鈥檚 .

Then last month, Dallas-based enterprise browser developer raised a $250 million Series E led by at a $4.8 billion valuation, and Boston-based cyber firm 鈥� which has developed a tool for family cybersecurity 鈥� locked up $140 million in equity and debt at a valuation of $1.6 billion in a Series G led by and .

Earlier stage

Even with some of those larger rounds and the drop in deal flow, 鈥� senior partner and head of the Israel office for cyber venture firm 鈥� said early-stage rounds continue at a frenetic pace, while broader market uncertainties make investors more cautious in later stages.

鈥淲e’re witnessing competitive Series A and B rounds for companies demonstrating clear market traction,鈥� he said.

Another trend Schreiber said is increasing is 鈥渃ybersecurity subsector saturation鈥� 鈥� where most major funds already have multiple security investments in their portfolios, creating a narrower field of quality investors as funds actively avoid portfolio overlap.

It remains to be seen if that, or anything, can curtail the momentum cybersecurity funding may have built in Q1 鈥� despite significant global challenges.

However, with a possible trade war brewing, geopolitical tensions rising and some VCs already warning of a recession and possible pullback, that momentum will be tested.

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Methodology

Cybersecurity is defined by the industries of network security, cloud security and cybersecurity, according to 小蓝视频色情网页版 data. Most announced rounds are represented in the database; however, there could be a small time lag for rounds reported late in the quarter.

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