Dive Brief:
- Funding deals in the cybersecurity market fell 20% year over year to $2.3 billion in the first quarter of 2024, Pinpoint Search Group said in a Thursday report.
- Cybersecurity vendors closed 77 funding rounds during the quarter, a slight increase from the 75 funding rounds Pinpoint tracked in the year-ago period. Seed rounds accounted for 2 in 5 funding transactions in Q1, keeping pace with last year’s funding totals.
- M&A activity also declined year over year, sliding from 31 M&A deals in Q1 2023 to 24 deals in the most recently closed quarter.
Dive Insight:
The amount of venture capital funds streaming to cybersecurity vendors remains near a three-year low reached in the previous quarter, according to Pinpoint’s research. Investment levels began to narrow during the second half of 2022. following a sudden decline from a high of $8 billion in Q4 2021.
Major cybersecurity vendors including Microsoft, Palo Alto Networks and CrowdStrike have been encouraging organizations to consolidate cybersecurity spending as businesses seek to move away from single point solutions.
Palo Alto Networks in February responded to this marketwide shift by moving its strategy to one it calls “platformization,” a program coupled with free incentives designed to attract customers away from legacy contracts.
CrowdStrike executives criticized their largest competitor’s plan and declined to adopt Palo Alto Network’s scheme to lure customers away from other vendors through deferred billing or deep discounts.
“Despite the year-over-year dip in funding not appearing favorable, it’s important to consider the nuances,” Mark Sasson, founder and managing partner at Pinpoint Search Group, said in a statement.
Cybersecurity funding surged in March, the final month of Q1, to $1.4 billion raised across 42 rounds. This marked the first time funding exceeded $1 billion in a single month since February 2023, according to Pinpoint.
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