This is a paradox. Cyberattacks against governments, businesses, and individuals are escalating dramatically, and spending on cybersecurity is reaching record amounts. But with so many cybersecurity startups competing with each other and with big tech companies like Microsoft and Palo Alto Networks, a shakeout in the field seems inevitable.
At least some startups will have to accept significantly lower valuations if they want to raise capital. A good example is Israeli cybersecurity startup No Name Security, which raised $135 million in 2021 at a $1 billion valuation. At the time, the company was generating just $3 million in annual recurring revenue, according to people familiar with the matter. ARR is currently at about $40 million, according to people familiar with the situation, and the company is preparing to raise funds again. But the company will likely need to do so at a significantly lower valuation than 2021 levels, according to multiple cybersecurity investors.