Are you a VC or angel thinking about where to invest your money? Think cybersecurity. The Q3 2015 Cybersecurity Market Report published by Cybersecurity Ventures states the worldwide cybersecurity industry is defined by market sizing estimates that range from $77 billion in 2015 to $170 billion by 2020.
It’s clear that cyber is a big and fast-growing market. Smart investors will isolate the hottest sectors within cyber, and place their bets on startups with the most experienced founders and innovative technologies.
So, what sectors are hot? Mobile security is white hot, and here are some data points to back that up:
- The total mobile security market is expected to grow from $1.5+ billion in 2014 to $5.75 billion by 2019, at an estimated Compound Annual Growth Rate (CAGR) of 30.7 percent from 2014 to 2019, according to a report by Markets and Markets.
- According to Gartner, nearly 2.2 billion smartphones and tablets were sold to end users in 2014. Gartner says, by 2018, 70 percent of mobile professionals will conduct all of their work on personal smart devices.
- A 2015 Silicon Valley Bank report states there will be more than 1 billion employee-owned smartphones and tablets in the workplace by 2018.
- The 2015 Alcatel Lucent Motive Security Labs report found that malware infections in mobile devices increased 25 percent last year. Android devices have now caught up with Windows laptops, which had been the primary workhorse of cybercrime, with infection rates between Android and Windows devices split 50/50 in 2014.
- According to the HP 2015 Cyber Risk Report, 97 percent of the mobile applications examined had significant flaws in their security features, leaving user data at risk.
- Apple is adding security to mobile devices with its new iOS9, adding two-factor authentication for user ID and stronger encryption to ward off hackers.
Recent cybersecurity M&A activity points to the strategic importance of protecting mobile platforms and devices. The market-leading mobile security players like AVG are doubling down on mobile; the top pure-play cyber vendors like Check Point are betting on new mobile product lines; and the major cloud app providers like Salesforce are investing to help protect their mobile users. Other significant cybersecurity M&A activity in the mobile space includes:
- AVG Technologies (Amsterdam, The Netherlands), the online security company for more than 200 million monthly active users, acquired Privax, a leading global provider of desktop and mobile privacy services for consumers. AVG will add Privax’s HMA! Pro VPN to its existing portfolio of security software and services that will be immediately made available to AVG’s global customer base. Privax has more than 250,000 paying subscribers worldwide using its VPN encryption service, while its popular free Web-based browser proxy service regularly attracts a global audience of over eight million unique visitors per month.
- Check Point Software Technologies Ltd. (San Carlos, Calif.), the largest pure-play security vendor globally, acquired Lacoon Mobile Security. Lacoon leads the industry in providing a solution to secure the entire mobile device with the best advanced threat catch-rate for enterprise-grade mobile security platforms. Lacoon was founded in 2011 by experts from the mobile cybersecurity and defense industries with R&D operations in Tel Aviv, Israel, and a sales team in San Francisco, Calif.
- Salesforce.com (San Francisco, Calif.) bolstered its mobile security when it recently acquired Toopher, a four-year-old two-factor-authentication startup out of Texas. Although terms of the deal were not disclosed, Business Insider reported that Salesforce granted a total of 37,408 shares to Toopher’s seven employees – worth approximately $2.5 million at the time.
The largest funding round for a security company in 2014 went to Lookout, a fast-growing mobile security company based in San Francisco, according to Venture Capital News. The company received an infusion of $150 million from a “who’s who” list of top venture funds and investment bankers. The lead investor in the funding round was T. Rowe Price Associates; others who invested include Goldman Sachs, Morgan Stanley Investment Management, Accel Partners, Bezos Expeditions, Khosla Ventures, Andreessen Horowitz and Index Ventures. Morgan Stanley, Goldman Sachs, Bezos Expeditions and Wellington Management Company invested for the first time in the company. Lookout’s total investment to date at that point was $280 million.
A hot mobile security IPO in 2014 was MobileIron, which raised about $100 million in its Wall Street debut last summer. Fast-forward to its Q2 2015 earnings that just came out, and the numbers are pretty impressive. Gross billings were nearly $39 million, up 11 percent year over year. Recurring billings were $25.1 million, up 36 percent year over year, and represented 65 percent of gross billings. “Billings from recurring sources hit an all-time high, surpassing the $100 million annualized run-rate in the quarter,” says Bob Tinker, CEO, MobileIron. The company reported total billings are expected to be between $160 million and $170 million for FY 2015.
There are a lot of mobile security industry figures, M&A activity, investments, analyst research reports and more to digest if you want to study the space. But to distill it all down in to an elevator pitch, here you go:
- Mobile security is a multibillion-dollar market opportunity with no end in sight.
- Mobile phones and tablets are becoming the primary workspace for users.
- Mobile devices and mobile apps are plagued by malware and targeted by hackers, which has generated a huge market need.
- Leading cybersecurity and tech vendors, bankers and VCs have confirmed the market and are actively investing in mobile security.
- Liquidity events in the form of M&A deals and IPOs are realistic goals for mobile security startups.
There you have it. Now, go find the next hot mobile security startup and tell us about it!
Steve Morgan is founder and CEO at Cybersecurity Ventures and editor-in-chief of the Cybersecurity Market Report and the Cybersecurity 500 list of the world’s hottest and most innovative cybersecurity companies. Follow Steve on Twitter or connect with him on LinkedIn.