New Breed of Venture Firms Specialize in Security

A category of venture capitalist firms has emerged focusing entirely on cybersecurity investments, a move driven both by the rapid growth in security threats and the increasing technical complexity of the marketplace, which can make it harder for generalist investors to spot promising early-stage startups.

While larger, generalist VC firms still account for the majority of security investments, at least two security-oriented venture firms have opened their doors in Silicon Valley in the past few years, while a third firm has shifted its practice to focus solely on security. The trio has raised new funds in the past two years totaling $500 million. The smaller, more-focused firms tend to specialize in finding interesting, early-stage startups, rather than late-stage investments.

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It isn’t clear if security-only firms will generate higher returns in the long run than more general technology venture capital firms that also have investments in security. The most active investors in cybersecurity over the past five years by dollar amount are still some of the larger venture firms, including Accel Partners, New Enterprise Associates, Andreessen Horowitz and Intel Capital, according to CB Insights.

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