UK cyber sector saw funding boost after first lockdown – but early-stage startup backing fell off a cliff

Cybersecurity

Funding secured by cybersecurity start-ups since the start of lockdown in March increased by more than half compared to the same period in 2019, according to new research released today by Plexal and Beauhurst.

This is in contrast to start-ups across all sectors, which saw investment volume fall by 10 per cent year-on-year. Only 23 of the 1,715 start-ups falling into administration, liquidation or dissolution since the start of lockdown were from the cybersecurity sector.

The research also found that despite the overall boost in funding (52 per cent increase) and deal numbers (33 percent increase), highlighting the importance of cybersecurity companies during the pandemic, activity consisted mainly of a small number of very large deals, showing that investors continue to prioritise later stage businesses.

The volume of funding secured by cybersecurity companies seeking funding for the first time fell to just GBP11.9m since lockdown, from GBP265 million in the same period in 2019 – as companies raising capital for the first time fell by 96 per cent. 

“While increased total funding demonstrates the relevance of cybersecurity and shows that the UK’s cyber industry has not been impacted to the same extent as others, the almost complete absence of backing for early-stage firms puts the sector’s future at risk, said Saj Huq, director of Innovation at innovation centre Plexal.

“It is these companies that we will ultimately rely on to solve the inevitable new cyber challenges arising from a society that is increasingly digital-first,” he added.

The study was conducted by Plexal, established by Delancey, and Beauhurst, a UK-based database for fast-growth companies, in order to get a better understanding of investment activity among the cybersecurity sector since the UK lockdown began on 23 March.

Plexal also delivers LORCA (London Office for Rapid Cybersecurity Advancement), a DCMS-backed innovation programme that helps cyber startups to scale.