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Venture Funding of Cybersecurity to Rise to $400 Million as Threats from IoT Grow

Lux Research

With rapid adoption of Internet of Things in products ranging from
connected cars to industrial workplaces, the need to secure cyberphysical
assets is growing, Lux Research says

BOSTON, MA – May 18, 2016 – Venture capital investment in cyberphysical security startups rose 78% to $228 million in 2015, and will rise to $400 million in 2016 as rapid adoption of the Internet of Things (IoT) raises the threat to products such as connected cars, smart homes and future factories, according to Lux Research.

As organizations begin to connect their internal processes and machines to the Internet, security remains weak on account of multiple factors including cost and the lack of adequate solutions. This lack expands the landscape of problems, adding to known risks and offering an even bigger market for security startups.

“Connected consumer and business products have begun flooding the market, but security has been an afterthought. The world now has to figure out how to secure the multitude of things that have recently become connected,” said Mark Bünger, Lux Research Vice President and lead author of the report titled, “Cybersecurity Venture Investment in Pervasive Computing and in the IoT.”

“Unlike the hacking of credit card numbers and Hollywood feature films, these attacks have more dangerous consequences and threaten the integrity of critical infrastructure,” he added.

Lux Research analysts studied funding of cyberphysical security firms, notably by venture finance firms, and the startup environment. Among their findings:

  • U.S. is a runaway leader. The United States accounts for nearly half of the IoT security startups, while a third are headquartered in Israel. Together, 77 startups assessed by Lux have raised $808 million since 2000, with many receiving no venture capital funding.
  • Platforms a prime focus. More than half of the companies aim to provide horizontal security platforms capable of supporting multiple types of IoT devices and environments. Securing industrial control system networks is a huge initiative across the IoT security landscape while securing the connected car is also a hot spot.
  • Hot areas of innovation. Device behavior analysis, network behavior analysis, and combinations of the two approaches are especially active areas of innovation, according to an analysis of startups by the types of countermeasures being developed. Methods for performing authentication and encryption in IoT environments are also a major focus.

The report, titled “Cybersecurity Venture Investment in Pervasive Computing and in the IoT,” is part of the Lux Research Industrial Internet of Things Intelligence and the Future Computing Platforms Intelligence services.