Bloomberg Law: Privacy & Data Security brings you single-source access to the expertise of Bloomberg Law’s privacy and data security editorial team, contributing practitioners,...
Investors are bullish on the expanding cybersecurity market in an increasingly hostile online world, attorneys and data security industry leaders told Bloomberg BNA.
Mainstream data breaches, such as the ones that struck over a billion Yahoo! Inc. user accounts, have put the focus on cybersecurity companies that are developing innovative defensive solutions. Increasing investment means that companies awaiting the next generation of cybersecurity solutions, such as artificial intelligence-enhanced threat assessment software, may have products in hand sooner.
With more companies eager to stop a growing cybersecurity risk, the industry is rapidly growing, according to Framingham, Mass.-based IDC Research Inc. The cybersecurity industry is expected to grow about 7 percent a year through 2019 to reach $46 billion in valuation, IDC predicted.
Additionally, the growth of internet-connected cybersecurity solutions is expected to rise 16.5 percent per year to $20 billion by 2020, Bloomberg Intelligence data show. IBM Corp. and Intel Corp. are leading the charge but other companies, including Microsoft Corp., Amazon.com Inc. and Salesforce.com Inc., are also expected to be major players in the arena, according to Bloomberg Intelligence research.
“The cybersecurity market is dynamic and growing,” Mike Gregoire, CEO of infrastructure software company CA Technologies in New York, told Bloomberg BNA. The growth is “fueled by the never-ending barrage of cyberattacks; the expanding attack surface of the growing adoption of cloud and IT; and the advent of the application economy,” he said. CA Technologies is the 13th largest infrastructure software company in the world, with a $13.4 billion market capitalization, Bloomberg data show.
Growing markets bring investors hungry to cash-in. Investors see “a large and growing appetite for cybersecurity solutions, basically a new green field market that translates into opportunity,” Robert Ackerman, founder and managing director at Allegis Capital, told Bloomberg BNA.
But Barmak Meftah, president and CEO of integrated security management solutions company AlienVault LLC in San Mateo, Calif., told Bloomberg BNA investors are looking to find “simplicity, orchestration and integration” in the cybersecurity solutions they invest in. Simply investing in cybersecurity companies that focus on just one or few attack surfaces “isn’t appealing,” he said.
As investors hit the cybersecurity investment market, they must remain cognizant of data privacy and cybersecurity risks that could ruin any expected profits, attorneys told Bloomberg BNA.
Marc E. Elovitz, who chairs the investment management regulatory & compliance group at Schulte Roth & Zabel LLP in New York, told Bloomberg BNA that investors should inquire about a cybersecurity company’s own security—which it may not have fully disclosed—before acquiring or making a large investment.
Michael L. Yaeger, data security and litigation special counsel at Schulte, told Bloomberg BNA that federal regulators, such as the Securities and Exchange Commission, have done their part to help expose risks. Regulators have started to ask the necessary “sophisticated questions” of cybersecurity companies, he said.
Companies seeking to invest in a cybersecurity venture firm must conduct a risk analysis to make sure the venture is meeting regulator standards, Yaeger, a former assistant U.S. attorney for the Eastern District of New York, said. A risk analysis is a good way to check for any data privacy or cybersecurity shortcomings that could limit investor funds, he said.
The cybersecurity industry may consolidate with larger players pushing out the smaller venture capitalists and private equity funds, according to Bloomberg Intelligence senior industry analysts. Because businesses are focusing their efforts on next-generation products, such as AI and sophisticated new computing techniques, larger and more established companies, such as Cisco Systems Inc., IBM and Symantec Corp., may begin to buy smaller players and consolidate the market, the analysts said.
Mefta said the “fragmented” cybersecurity industry has many small businesses providing particularized security solutions that present targets for larger companies to swallow up. That may be beneficial in the short-term but not over a longer period because a cyberthreat in 2017 may not have the same “threat vector” in 2020, he said.
Big data “analytics, artificial intelligence and machine learning” will start to thrive “at the core of the security market,” Gregoire said. Blockchain differentiated authentication and new kinds of encryption are beginning to “change the game,” he said.
To contact the editor responsible for this story: Donald Aplin at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)