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The Research Pitch

February 5, 2022

2021 elevated information security's standing in IT and the venture ecosystem

A few short years ago, information security was an afterthought in the enterprise software investment landscape.

Some generalist investors intentionally avoided the space due to a lack of industry expertise and companies struggled to cross the valley of death before exiting at relatively low valuations.

Infosec startups were most frequently supported by specialist venture partners and strategic corporate investors. Acquisitions contributed higher exit value than IPOs given scaling challenges.

But times have changed.

Network security companies raised $5 billion in VC last year.

In 2021, a hedge fund was the most active investor in the vertical and an infosec company achieved the highest Series D deal value we have tracked in the US in any industry at $1.3 billion.

The public market pipeline opened a gusher with $16.2 billion in deal value across eight exits.

Our new infosec research assesses the opportunities underlying this maturation and looks ahead to their potential.

Rapid market size growth is driving high traction for startups, particularly in cloud vulnerability assessment, secure coding, and Web3.

Click to download a free preview of our 2021 Annual Information Security Report.

PitchBook clients can access the full research here.

Feel free to reach out to discuss any of these topics or companies further.

Best,

Brendan Burke
Senior Analyst, Emerging Technology

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Market Updates

Will recent stock selloffs soon reverse the trend of stellar private fund returns?

Only time will tell, as our Global Fund Performance Report shows more astronomical gains in the latest data through Q2 2021. But a lot has happened since last June in terms of COVID-19 variants, the global economy, and public stocks.

Key takeaways from our new report:

VC, PE, and funds of funds continued to post incredible returns through Q2, with secondaries shooting up to join them.

With the spread of the Omicron variant and more supply chain issues in Q4, we expect full-year 2021 performance to come back down to earth.

Our research shows that IRRs gradually become more predictive after year three.

Get all 28 pages of fresh analysis, fund performance metrics, cash flows, and more across all strategies:

read the free report

Thematic Research

Healthtech Partnership Tracker

Healthtech startups are partnering with corporations, insurers, government agencies, and other startups for all sorts of reasons:

to increase their market size
to develop new products
to forge relationships with potential acquirers

Our new tracker compiles a list of recently announced partnerships and provides an overview of trends and key partnership types:

read the free research

Webinars & Events

Are we starting to see downward pressure on venture capital valuations?

Why has VC consistently posted the best performance recently among private strategies?

Our analysts hosted a free webinar this week to present our thoughts on what drove record activity in 2021 and what to expect this year: watch the replay

Feb. 24: How can GPs navigate the current fundraising environment? Get free tips from a former LP on what institutional investors look for in a fund manager. Register here.

Deal Commentary

Senior analyst Alex Frederick weighs in on this week's $50 million Series B for foodtech startup Lunchbox, a funding round led by Coatue:

"The Lunchbox deal represents a growing interest in the next evolution of restaurant ecommerce.

"Third-party delivery apps became critical hospitality infrastructure in the 2010s, enabling restaurants to meet the ever-increasing demand for mobile commerce and delivery without sophisticated tech skills or dedicated delivery staff.

"During the pandemic, many restaurants found third-party delivery apps to be an important, if not essential, sales channel and source of lead generation. However, high service fees have made it challenging to operate this sales channel profitably.

"Lunchbox helps restaurants break reliance on food delivery apps and improve profits by converting third-party customers to first-party. It does this by offering restaurants a suite of tools for building a digital storefront as well as marketing and customer retention.

"The funding will enable Lunchbox to continue developing next-gen technologies and services, including cryptocurrency payments capabilities, NFT loyalty programs, virtual restaurants in the metaverse, and more robust restaurant marketing services.

"Other companies disrupting third-party food delivery include Olo, Toast, LimeTray, Brightloom, and Slice."

Alex Frederick

Senior Emerging Technology Analyst
Foodtech

In the News

Our insights and data featured in the press:

Startup investors cut valuations amid tech stock rout, dismal IPOs. [WSJ]

Funds are betting big on the belief that the next generation of financial apps and internet services will be crypto based. [City A.M.]

While not all arrows are pointing up for female founders raising venture capital, most trends suggest that momentum is building. [Forbes]

In 2021, global indoor farming startups raised $1.6 billion across 70 deals, about 86% more money than the previous year. [Morning Brew]

The rolling one-year IRR for VC rose to 65.5% as of Q2 2021, notching the fifth consecutive quarter of sequential IRR increases. [VC Journal]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.

ICYMI

Highlights from our other recent research:

Market updates

Thematic research

Emerging Technology Research

Coming next week (subject to change)

US VC Valuations Report (sneak peek)
ETR: Enterprise Healthtech
ETR: Foodtech
Analyzing human movement tracking and sleeptech

Thanks for reading! Feel free to email us any time with feedback, questions, or tips!

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PitchBook News - Everyone loves a comeback story

Older messages

Market map: Startups scale to secure the cloud

VC funding for HR tech soars

VC, PE fund returns stay stellar

VCs bet on cloud, ID security in 2021

PE pans SEC's push for more data disclosure

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