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Next-gen Cybersecurity
Overview
Emerging threats require proactive tools that take a holistic view of corporate networks
Corporate cybersecurity today is tasked with protecting connected hardware and cloud-based software from myriad threats such as unauthorized access and data theft. The next-generation of tools leverage AI and machine learning to dominate endpoint protection, detection, and response.
The traditional enterprise network perimeter is fading and enterprise workflows are increasingly reliant on the internet and cloud applications. Personal computing devices and connected industrial hardware connect to corporate networks on a daily basis, leaving many potential entry points for malicious actors. The evolving threat landscape requires a holistic approach to cybersecurity that considers an organization's entire network landscape.
Advances in AI help companies bridge this gap by detecting threats using behavioral analysis. Companies can now use signature-based methods to identify threats proactively, even unknown ones which would have otherwise gone undetected by traditional antivirus programs. AI also allows for efficient monitoring, investigation, and automation of common remediation tasks that would have been traditionally carried out manually—a time-consuming process prone to error.
Market Sizing
The US market for next-generation cybersecurity could reach up to USD 28.1 billion by 2025
USD 15.0 Bn
USD 21.5 Bn
USD 28.1 Bn
COVID-19 IMPACT
The rapid shift to remote work has led to new threats:
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Phishing attacks grew 220% in 2020, leading to a lack of confidence in current corporate cybersecurity efforts.
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The FBI received 3,000 - 4,000 daily complaints related to cybersecurity, that’s up to 4x beyond pre-pandemic rates.
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More than 70% of cybersecurity leaders cite remote workers as security risks and 41% blame budgetary restrictions as their top concern.
Prioritizing security translates to double-digit revenue for several disruptors:
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Crowdstrike saw 82% year-over-year (YoY) growth in both customers and revenue.
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Cato Networks doubled annual recurring revenue (ARR).
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Arctic Wolf more than doubled subscription revenue with enterprise clients growing 180%.
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Snyk reported a 275% YoY growth in ARR.
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SentinelOne expected revenue growth to more than double in 2020.
Security budgets are going up across industries:
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More than 50% of surveyed executives plan to increase their cybersecurity budgets in 2021 with the healthcare sector leading the way.
Market Mapping
Large incumbents maintain a strong presence in this industry as they expand traditional cybersecurity portfolios with complementary products focused on cloud services produced through a mix of internal development and acquisitions. Some larger disruptors also follow an acquisition strategy, acquiring smaller startups to expand their portfolios. These acquisitive incumbents and larger disruptors are therefore listed across multiple segments of the market map.
The endpoint security space, in particular, has a significant incumbent presence, as traditional antivirus software vendors are adding behavior analytics and artificial intelligence to their products. Symantec (now owned by Accenture) and Trend Micro are some of the largest endpoint protection providers globally, each claiming more than 18% of the segment’s overall market share.
While the market map features more endpoint security companies than any other segment, companies offering cloud security products have attracted the most private funding—more than USD 7.1 billion for the cloud network and cloud-native application security segments as of August 2021. Further, nine out of ten startups in this hub were established over the last decade and have collectively raised over USD 12 billion as of the same date.
Cloud network security
?Cloud-native application security
?Endpoint security
?Industrial IoT/Operational technology security
?Detection and response tools
?Managed detection and response (MDR)
?API and web application security
?The Disruptors
A majority of these disruptors offer tools for threat detection and response either as standalone products or along with cloud security and endpoint security offerings. As of August 2021, the highest amount of funding has gone towards companies in the detection and response segment.
Several next-generation cybersecurity companies have already reached valuations of at least USD 1 billion. Cloud-network security startup Netskope has garnered the highest amount of funding (USD 1 billion) as of August 2021. SentinelOne went public in June 2021 which valued the company at USD 8.9 billion, implying a 187% growth from the valuation during its last fundraise in November 2020 (USD 3.1 billion). SentinelOne also leads the endpoint security, industrial IoT/operational technology security, and managed detection and response (MDR) segments in terms of funding, with Arctic Wolf being the highest funded pureplay MDR provider in this space.
More than 90% of these disruptors were established in the last decade and most are in either the early or growth stage. Many also have a footprint across multiple market segments in part by acquiring smaller startups to accelerate product launches and absorb expertise amid a shortage of cybersecurity professionals.
Cloud network security
?Disruptors
Zscaler
Darktrace
Netskope
Sysdig
Orca Security
Wiz
Illumio
Cato Networks
Vectra
Lookout
Menlo Security
Versa Networks
iboss
Armor
Axis Security
Sonrai Security
Proofpoint
Perimeter 81
Banyan Security
Adaptive Shield
Elisity
Cyolo
Watchlist
Lightspin
Mondoo
Blumira
Acreto
Tenacity
C3M
Cloud-native application security
?Disruptors
CrowdStrike
Lacework
Snyk
Sysdig
Aqua Security
Armor
VirSec
Dazz
Laminar
Watchlist
Lightspin
Traceable
Monad
Mondoo
DeepFactor
Oxeye Security
Tromzo
Akeero
Endpoint security
?Disruptors
CrowdStrike
SentinelOne
Darktrace
Cybereason
Illumio
Lookout
Deep Instinct
Armor
EclecticIQ
Attivo Networks
Morphisec
Watchlist
Threatlocker
SolCyber
RevBits
ZecOps
CrowdSec
BreachQuest
Industrial IoT/Operational technology security
?Disruptors
SentinelOne
Darktrace
Claroty
Armis Security
Dragos
Vectra
Nozomi Networks
VirSec
OPSWAT
Attivo Networks
Cylus
Xage Security
Cynerio
Sternum
SAM Seamless Network
Karamba Security
Cyolo
Watchlist
Mission Secure
Shift5
NanoLock Security
Cylera
Viakoo
Shield-IoT
Dellfer
RazorSecure
Acreto
SynSaber
Suavei
InsightCyber
Detection and response tools
?Disruptors
CrowdStrike
SentinelOne
IronNet Cybersecurity
Cybereason
Exabeam
Vectra
ReliaQuest
Corelight
ZeroFOX
Panther Labs
Hunters
Uptycs
Proofpoint
ReversingLabs
EclecticIQ
ExtraHop
Stellar Cyber
Adlumin
Netography
LogPoint
Laminar
Mitiga
Confluera
SenseOn
Watchlist
Stairwell
Query.AI
Anvilogic
Blumira
RevBits
ZecOps
ThreatWarrior
Tenacity
AgileBlue
ContraForce
Kognos
BitLyft
Managed detection and response (MDR)
?Disruptors
CrowdStrike
SentinelOne
Cybereason
Arctic Wolf
BlueVoyant
Expel
ZeroFOX
Armor
Red Canary
deepwatch
[redacted]
Huntress
Adlumin
LogPoint
ActZero
Mitiga
Watchlist
SolCyber
Cyvatar.ai
Blackpoint Cyber
UncommonX
BreachQuest
Quorum Cyber
AgileBlue
BitLyft
Theta432
Startup Defense
CYSIAM
CyberMaxx
API and web application security
?Disruptors
Darktrace
Noname Security
PerimeterX
VirSec
Salt Security
Cequence Security
Proofpoint
Banyan Security
Kasada
Watchlist
ThreatX
Traceable
Valence Security
Feroot Security
Netacea
Invicti Security
Zscaler
Zscaler offers cloud security products such as cloud access security brokers (CASBs), secure web gateways (SWGs), and other tools to protect cloud networks, under a secure access service edge (SASE) architecture that is distributed across more than 150 data centers globally. Zscaler also offers cloud security posture management (CSPM) tools that enable organizations to identify misconfigurations and vulnerabilities across cloud-native workloads. As of May 2021, the company had more than 200 patents issued and pending, and served more than 5,000 customers including more than 25% of the Fortune 200.
For FY2021, Zscaler reported USD 673.1 million in revenues, reflecting a growth of 56% YoY. Zscaler’s adjusted operating income rose to USD 78 million, more than double the USD 38.2 million recorded during FY2020. For Q1 FY2022 (ended October 31, 2021), the company reported a revenue of USD 230.5 million, representing a year-over-year (YoY) growth of 62%. Management guidance for revenue for FY2022 stands in the range of USD 1 billion and USD 1.01 billion, which implies an YoY growth of 48.6% to 50.1%, respectively.
Zscaler has made several acquisitions including the cloud security startup Edgewise Networks, in May 2020 for an undisclosed amount, to enhance application-to-application communication security. In April 2020, the company acquired the CSPM startup Cloudneeti for an undisclosed amount, enabling Zscaler to expand its cloud security offering to offer CSPM solutions. Other notable acquisitions of the company include Trustdome, and Smokescreen Technologies in April 2021 and May 2021, respectively. The company commenced trading on the Nasdaq in March 2018, raising USD 192 million in its initial public offering (IPO).
- Segment:
- Cloud network security
- Total funding:
- USD 148.0 million
- Competitors:
- Netskope, Cato Networks, Lookout, Menlo Security, iboss, Bitglass
Disruptor Funding History
Cloud network security:
Zscaler
Darktrace
Netskope
Sysdig
Orca Security
Wiz
Illumio
Cato Networks
Vectra
Lookout
Menlo Security
Versa Networks
iboss
Armor
Axis Security
Sonrai Security
Proofpoint
Perimeter 81
Banyan Security
Adaptive Shield
Elisity
Cyolo
Lightspin
Mondoo
Blumira
Acreto
TenacityCloud-native application security:
CrowdStrike
Lacework
SnykSysdig
Aqua SecurityArmor
VirSec
Dazz
Laminar
TraceableLightspin
MonadMondoo
DeepFactor
Oxeye Security
Tromzo
AkeeroEndpoint security:
The Incumbents
Incumbents buy the future with acquisitions of next-generation cybersecurity startups
The cloud service providers, pureplay cybersecurity companies, and endpoint security software providers in this section have either acquired stakes in next-gen startups, or pivoted their business model to offer products and services across multiple segments.
Major cloud providers like Microsoft and Fastly generally bundle security products along with their primary offerings. Pureplay cybersecurity incumbents, such as Palo Alto Networks, have been gradually building their product portfolio to keep up with industry trends, using acquisitions to bridge gaps and speed up go-to-market activities.
Incumbents in the endpoint security segment have historically offered traditional antivirus software to retail and enterprise customers. These companies have improved their offering to feature AI and behavior analytics to detect known and unknown threats. These companies have also started building endpoint detection and response (EDR) tools to leverage automation and machine learning.
