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For Cybersecurity Startups Raising Cash, Customers Not Required

Cybersecurity startups are reaping tens of millions of dollars in funding despite a lack of big customer contracts, raising the likelihood of a shakeout in the years to come.

The valuations being placed on some of the most high-profile startups in the sector—often higher than $200 or $300 million—might not seem eye-popping in an era where many consumer Internet startups are commanding multibillion-dollar prices without much revenue.

But to many people in the security industry, the current frenzy looks like a race among startups to position themselves for a future windfall even before their products are validated by customers. The assumption by these startups is that successful—and costly—hack attacks will continue unabated and corporate security budgets will increase markedly.

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