SMEpost

Digital economy on the rise, funds flow for cybersecurity start-ups

Bengaluru: When Vishal Gupta started Seclore, an enterprise security company in 2010, investors and customers were apprehensive. There was till then no established model of an Indian software provider in the cybersecurity space. “We had trouble establishing trust,” Gupta recalls.

Gupta says, the environment has dramatically changed. Investors and customers are excited. Out of the 29 funded startups in the cybersecurity space, 12 have raised funding in 2015 and 2016, according to startup analytics firm Tracxn. Some 27 new companies came up in this space in the same period.

Much of this is driven by large-scale data breaches across sectors. “Even five years ago, security used to be a sub-function of IT. It wasn’t something which would get reported in the top management. Now, information security is becoming a boardroom topic. When you lose information, it is not just about embarrassment anymore. You lose money, customers, and even lives. Acknowledgement of that implication has made budgets and investor interest shoot through the roof,” says Gupta.

Sandip Panda, founder of InstaSafe, a cloud security startup, says fraud levels have increased sharply, and everyone’s impacted, from individuals to the largest of companies. Investor interest is also driven by Indian startups’ success with customers, including global ones. Druva, one of the early and most successful startups in the space, has more than 4,000 customers, with 85% of its customers being outside India. Founder Jaspreet Singh says Druva is invariably competing with global players like IBM, EMC, and Commvault.

Seclore works with over 10,000 small and large companies. Although US customers account for only 25% of Seclore’s customer base, almost 50% of its revenue comes from that country. Indian Angel Network (IAN) has made three bets in this space, their first investment being in Druva in 2010. Padmaja Ruparel, President, IAN, says there is a lot of potential in the space for innovation.

Jishnu Bhattacharjee, MD, Nexus Venture Partners, which has made five investments in the space, says cyber security innovation is happening in India, though not at the scale at which it is happening in Silicon Valley or Israel. According to research firm CB Insights, most of the $3 billion invested globally in the cybersecurity space in 2015 went to startups in the US and Israel.

Almost all the funded companies in India were bootstrapped for quite a significant amount of time, due to lack of early-stage funds. All of the investments made since 2015 were raised by companies that were formed on or before 2013.

Pune-based Druva, founded in 2008, is the most funded, at $118 million. “We were early to spot the trend and go all in, but 2008-09 were bad years. In India, no one wanted to fund product companies because it was still obsessed with business process outsourcing. We got our first institutional funding in 2010, from Sequoia and IAN,” says Singh.

Seclore’s Gupta says investors here usually want to invest in companies that are focused on India as a market. “Interest is high, but investment still isn’t,” he says.

Nexus’ Bhattacharjee says cybersecurity is an evergreen space. “Hackers outwit security advances, security becomes more sophisticated, and then so do hackers, and the cycle goes on.”

Source: Times of India