Published on January 25th, 2023 📆 | 7876 Views ⚑0
The top VCs in cybersecurity
When the economy turns, VCs have to make a big distinction between what is merely useful, and what is indispensable.
Cybersecurity, which encompasses the range of technologies and strategies to prevent data leaks and breaches, stands out as a sector that has seen demand boom for Fortune 500 companies. As Fortune previously reported, the global cybersecurity market is expected to reach $403 billion by 2027—making the compound annual growth rate 12.5% from 2020 to 2027.
“Nobody is fully prepared for cyberattacks, not even the most powerful nations on earth,” explains Bessemer Venture Partners investor David Cowan. “Even the stuff that we think has been solved has to be solved again, which is why cyber risk is job security for VCs,” Cowan says.
“When I started, it was mostly operational issues at an enterprise that were at risk. Now it’s strategic,” said Ted Schlein, founding partner at Ballistic Ventures. “Boards of directors are forced to pay attention to cyber-risk issues; the CISO [chief information security officer] has become one of the most important executives in an organization; and spending to keep the enterprise safe has steadily increased,” he added.
These investors have spotted some of the biggest startups before there was a product and, in some cases, before there was even an idea. Some dealmakers have been in the industry for decades; others are rising stars. We talked to cyber experts, entrepreneurs, and VCs themselves to highlight who is making moves in this sector. Below, the 13 most important investors to know in cybersecurity.
Alberto Yépez, Forgepoint Capital
Courtesy of Alberto Yepez
Top deals: Attivo Networks, Area 1 Security, Cysiv, Uptycs, AlienVault
Home base: San Francisco
Yépez has had a seminal career in the cybersecurity industry as an entrepreneur, executive, private equity investor, and now venture investor. Empathy is at the core of his investing approach. “You need to gain the hearts and minds of entrepreneurs,” he explained. “I want to be the investor that I always wanted to have in my corner.”
Yépez was born in Peru and moved to California to attend the University of San Francisco. After a successful career in management at Apple and Oracle, he cofounded and led marketing platform enCommerce, which was acquired by Entrust in 2000. He cofounded Forgepoint Capital, a fund focusing on cybersecurity companies, in 2015 along with Don Dixon. As a VC, Yépez was a seed investor in threat intelligence platform AlienVault, which was acquired by AT&T in 2018. Attivo Networks, an attack prevention company that Yépez invested in, was acquired by SentinelOne in 2022. Area 1 Security, an anti-phishing email protecting service Yépez was an early investor in, was acquired by Cloudflare in spring 2022. Yépez emphasized his commitment to fostering greater diversity in the cybersecurity space, especially by recruiting veterans, women, and people of color.
David Cowan, Bessemer Venture Partners
Courtesy of David Cowan
Top deals: VeriSign, Good Technology, Defense.net, Claroty
Home base: Redwood City, Calif.
Cowan is a legendary cloud infrastructure investor, known for some big bets like Twitch and Rocket Lab. Yet cybersecurity was the technology that first piqued Cowan’s interest. He recalled being intrigued as a child in 1977 when he read a Scientific American article about the invention of public key cryptography, the foundational technology of cybersecurity. “It was a conversation I had with my father at the dinner table, talking about the implications of this discovery and what it meant for the ability to encrypt information,” he explained. Years later, when he became a venture capitalist in 1992, the first company he reached out to was RSA Security, which was founded by the scientists who invented public key cryptography, and he asked to invest. “This was a time when no venture money had gone into security,” he explained.
Cowan cofounded mobile security platform Good Technology, which was acquired by Blackberry in 2015; cloud-based attack prevention software Defense.net, which was acquired by F5 in 2014; and incubated VeriSign, which was originally RSA Security. He was also an investor in file integrity monitoring (FIM) technology Tripwire, identity theft protection company LifeLock, and identity protection service Auth0, which was acquired by Okta for $6.5 billion last year. Bessemer Venture Partners was also a cofounding investor in Israeli cybersecurity foundry Teammate, which recruits members of the Israeli intelligence, called Unit 8200, to cybersecurity. “In order to defend against nation-state cyberattacks, you need people who understand nation-state operations,” Cowan explained.
Iren Reznikov, S Ventures
Courtesy of Reznikov
Top deals: Axonius, Vaulter, Medigate, Hunters.ai, Securiti.ai, Noetic Cyber
Home base: Tel Aviv
Prior to her career in venture, Reznikov was an economist at the Ministry of Finance in Israel where she navigated investment treaties internationally, many of which were in the cybersecurity sector. Since jumping into venture, she has made huge key investments at YL Ventures in automotive security firm Karamba Security and cybersecurity asset management Axonius, which is valued at $2.6 billion. Now she is a partner at S Ventures, the venture arm of cybersecurity giant SentinelOne that was launched in September 2022, and leads the $100 million multistage fund investing in cybersecurity internationally. S Ventures portfolio companies not only have access to SentinelOne’s capital, but also exposure to the cyber giant’s tech ecosystem. S Ventures is looking for startups that align with SentinelOne’s open application ecosystem. “I’m looking for flexibility of mind in founders because the startup journey is so dynamic, and no matter when you’re investing in the company, things will always change,” she explained.
Throughout her career, Reznikov has focused on investing in companies that diversify the cybersecurity space, first with Red Capital partners, where she invested in female-led startups such as security provider Sternum, and later with the Spire Fund run by Cisco, which invests in startups led by people of color and women. “From my perspective, like I did throughout my career, the best way to promote diversity is to be in the room and and speak your mind,” she explained.
Gili Raanan, Cyberstarts
Courtesy of Raanan
Top deals: Wiz, Fireblocks, Island, Noname
Home base: Michmoret, Israel
Even among the top investors, Raanan’s track record is remarkable: Of the nine initial investments he made when starting his own fund, Cyberstarts, in 2018, five have become unicorns, and the investments are now valued at $20 billion. He owes his success to one core tenet of his investing: “Product ideas are overrated, and people are underrated,” he explained. “Not just in cybersecurity, but in life,” he added. At Cyberstarts, Raanan recruits the founders first, and the team helps them hone their idea and later product.
Before embarking on a career in venture, Raanan spent a decade working in Israel’s intelligence arm, Unit 8200, before becoming a serial entrepreneur and then breaking into venture at Sequoia, where he spent 12 years. He was the first investor in Fireblocks, which is valued at over $8 billion, and Wiz, which is now worth $6 billion.
To catch Raanan’s eye—and wallet—founders have to be more than meet the qualifications. “I’m looking for people with at least one superpower,” he explained. “If you’re an entrepreneur, I’ll meet you and spend time with you and I’ll try to assess, what’s your superpower? Are you someone who’s able to sell everything to anyone? Are you able to form the best engineering team in the universe? What’s special about you?”
Chenxi Wang, Rain Capital
Courtesy of Wang
Top deals: Claroty, Jupiter One
Home base: Silicon Valley, Calif.
Before becoming an executive and investor, Wang was a foundational academic in cybersecurity. She received her Ph.D. from the University of Virginia and then became a research professor at Carnegie Mellon before moving to Silicon Valley to work in the industry. After working in operational roles at various cyber companies including Intel and Twistlock, she began consulting on venture investments. In 2017 she started Rain Capital, a completely woman-owned VC fund.
In 2000, she invested in asset monitoring software Jupiter One, which is now a unicorn. In early 2018, she invested in software-as-a-service (SaaS) cybersecurity platform Claroty, which is now valued at about a billion dollars. “In the early stage, you don’t have a lot of metrics and data to play with, so you have to go by how much you understand the technology and the market,” she explained. Wang is also the founder of the nonprofit Forte Group, which is an organization for women in cyber to connect and discuss career opportunities and how to bring more equity to the cybersecurity industry.
Ariel Tseitlin, Scale Venture Partners
Courtesy of Tseitlin
Top deals: Expel, BigID, AppOmni
Home base: San Francisco Bay Area
As a former operator at Oracle and director of cloud solutions at Netflix, Tseitlin decided to specialize in investing in the areas in which he saw the most opportunity when he joined Scale in 2013: cybersecurity and cloud infrastructure.
Now he has used his operations experience to spot huge wins like SaaS security platform AppOmni, data management company BigID, and risk management platform CyberGRX. “Cybersecurity was a function I managed in prior operating roles, so that made it a natural area for me to explore,” he said. “When I first started investing almost a decade ago there was so much opportunity that it became a major focus area for me, and I don’t see innovation in cybersecurity slowing down anytime soon.”
Mark Hatfield, Ten Eleven Ventures
Courtesy of Hatfield
Top deals: BlackHorse, Dark Trace, Cylance
Home base: Boston
Hatfield began his career on the IT side of businesses, working at the Bank of Montreal and Motorola before jumping fully into venture. First he became director of Motorola ventures and then a partner at Fairhaven Capital. He cofounded cybersecurity focused firm Ten Eleven Ventures with Alex Doll in 2014. Ten Eleven is stage agnostic and global, so the fund can invest past a startup’s seed stage. Hatfield has invested in IT solutions firm BlackHorse, which was acquired by Parsons last year; A.I. security company Cylance, which was acquired by Blackberry in 2019; and security monitoring platform Verodin, which was acquired by FireEye in 2019.
While Hatfield acknowledged he has seen a rising in awareness of cyber threats over the span of his career, the rate of innovation often creates new gaps for cyberattacks to occur. “Enterprises adopt new technologies, like A.I., to accelerate innovation and efficiency without always knowing the security implications that will follow,” he explained. “We invest in companies that help secure these new technologies, which helps enterprises safely create competitive advantages—and prosper.”
Cack Wilhelm, IVP
Courtesy of Wilhelm
Top deals: Obsidian Security, Traceable
Home base: San Francisco
Wilhelm, who started her career as a professional runner with Nike before working in operations at Oracle and Cloudera, in 2022 became the first woman promoted to general partner at IVP since 1983 after a standout year for her portfolio. With a focus on cloud infrastructure, Wilhelm has spotted up-and-comers in the cybersecurity space. So far, she’s led investments in data monitoring platforms Monte Carlo and Obsidian Security. She looks for startups that have the combination of passionate founders and market fit. She emphasized her commitment to elevating more women to the role of decision-makers in venture capital, and thus deploying capital to more women-founded startups.
“As the venture capital market has matured in age and sophistication, venture firms are competing doggedly for the very best assets. This reality has magnified the importance of efficient, effective decision-making within a firm, as investors and investment teams are being asked to make quicker decisions on larger dollar values,” Wilhelm wrote on her blog. “Making informed but swift decisions is a significant competitive advantage that only the most functional, decision-oriented firms can do,” she added.
Grace Cassy, CyLon
Courtesy of Grace Cassy
Top deals: Immersive Labs, Tessian
Home base: London
After working in U.K. diplomatic service for a decade and being a national security adviser to Prime Minister Tony Blair between 2004 and 2006, Cassy knew she had the expertise to meet the growing demand for cybersecurity startup funding. In 2015 she cofounded CyLon with Jonathan Luff and Alex van Someren. Since then, CyLon has invested in companies such as cybersecurity training platform Immersive Labs, which has gone on to raise over $123 million in venture funding, and email protection service Tessian, which has raised $133 million in funding.
“As the world becomes increasingly digital, good security becomes the enabler for much of financial services, health care, retail, mobility, media. In fact, most things that people do in their daily lives now need good security baked in,” Cassy explained. “I can’t think of a more important space to be in, and it’s only getting more relevant with increasing geopolitical turmoil.”
Jay Leek, Syn Ventures
Courtesy of Leek
Top deals: Cylance, Talon Cyber Security
Home base: West Palm Beach, Fla.
Leek emphasized that his first career as a cybersecurity practitioner and chief information security officer (CISO) guides his investing strategy and the direction of his firm Syn Ventures, which he cofounded with fellow veteran CISO Patrick Heim last year. Leek was the head of security at Nokia globally before becoming the first CISO in private equity at Blackstone. In 2017 he started his first venture fund, called ClearSky Security, before founding Syn Ventures in 2021, which is the only venture fund to be led by two former full-time CISOs of Fortune 500 companies. Syn Ventures has spotted industry-shifting companies, like Cylance and hybrid workforce protection company Talon Cyber Security, before founders had a product or revenue.
Leek explained that he especially seeks out companies that address the talent shortage in the cybersecurity workforce by addressing the most labor-intensive aspect of cyberattack prevention. “We’re looking to invest in next generation technology capabilities that can materially reduce the amount of labor or manual effort required to manage cyber risk across the entire cybersecurity program,” he said. He said he is impressed by startups that “are thinking about solving either new problems that haven’t been solved before, or they’re thinking about solving legacy or existing problems in a completely different way than how people have done it in the past,” he added. He explained that creating programs to specialize and fast-track cybersecurity degrees and introducing the career path in earlier levels of education are two methods he believes could recruit more talent in the space.
Philippe Botteri, Accel
Courtesy of Botteri
Top deals: CrowdStrike, Cyera, DocuSign
Home base: London
Botteri joined Accel in 2011 after building Bessemer Venture Partners’ cloud practice for five years. Born in France, he invests with a globally minded approach. He publishes an annual report on European and Israeli cloud and security companies, bringing those two regions into focus in his investments.
He was an early investor in DocuSign, which went public via IPO in 2018, and he invested in cybersecurity data protection company Cyera and cloud protection firm CrowdStrike.
John Brennan, YL Ventures
Courtesy of John Brennan
Top deals: Medigate, Axonius, Build Security
Home base: San Francisco
Brennan emphasized that the team at YL Ventures, an American-Israeli seed-focused firm, is what makes the the venture successful. “We are greater than the sum of our parts,” he explained. YL Ventures was founded in 2007 by Yoav Leitersdorf and John Quigley, and senior partner Ofer Schreiber heads up the Israel office.
Brennan joined YL Ventures as a senior partner in 2017 for the launch of its third fund, where he worked on the seed deal for Axonius. YL Ventures was also a seed investor in health care cybersecurity firm Medigate, which was acquired by Claroty for $400 million earlier this year. YL Ventures was also a seed investor in cloud security platforms Orca Security and Hunters.
Finding a winning team is important, but that’s just when the work begins, according to Brennan. To help founders successfully go to market, YL Ventures focuses on honing the startups customers and potential for year after year revenue. “What we’re doing from day zero is making sure that they get the market input, maybe from our portfolio company founders, to make the strategic decisions to go after customers, close deals, build revenue, and raise a Series A round,” he said.
Ted Schlein, Ballistic Ventures
Courtesy of Ted Schlein
Top deals: IronNet Cybersecurity, Synack, Shape Security
Home base: Menlo Park, Calif.
Schlein started investing in cybersecurity 26 years ago, and since then has seen the focus in cybersecurity shift from operational issues to strategic questions as he made some of the most lucrative investments in the history of the industry. “My opinion is that it has always been an important space, but the market size of the opportunities continues to expand as more and more people realize the critical nature of the risk,” he explained.
Schlein has been a partner at Kleiner Perkins since 1996, and has backed some of the most seminal cybersecurity companies to date. Schlein led security operations company Phantom’s Series B round prior to the company being acquired by Splunk for $350 million in 2018. He was an early investor in fraud prevention company Shape Security, which was acquired by F5 in 2020. In 2021, Schlein helped found cybersecurity-focused VC firm Ballistic Ventures, where he serves as a general partner.
For Fortune’s coverage of the top health tech investors, see our list here.