Cyber security has taken a rough turn lately, with investment in the industry falling 40% compared to the previous year. But there are hopeful early, even preliminary, signs of recovery.
The vast majority of chief information security officers reported higher budgets for 2024, according to cybersecurity-focused VC firm NightDragon. And, despite lower overall investment in the cybersecurity industry in Q1 2024, the number of deals increased compared to Q1 2023, by hiring component Peak.
In this setting it is Evolution Equity Partnersa New York-based growth capital investment firm, on Tuesday launched a $1.1 billion cybersecurity and artificial intelligence fund, the third such fund in Evolution’s history.
The fund, called Evolution Technology Fund III, is oversubscribed, with participation from existing and new sponsorships, government investors, insurance companies, foundations, fund of funds, family offices and angels. It will seek investments ranging from $20 million to $150 million in cybersecurity companies and startups that leverage machine learning and artificial intelligence to build “market-leading” platforms, Richard Seewald, managing partner at Evolution and one of the founders of the company.
“Evolution Technology Fund III has already backed 15 leading cybersecurity companies, starting its investment period 12 months ago,” said Seewald. “We expect to invest in a portfolio of up to 30 companies in this fund. We will work with management teams and founders, providing them with support and insight in areas such as sales and marketing, product technology, human capital, M&A and business development, truly enabling them to excel.”
With Evolution Technology Fund III, Evolution’s strategy will be to keep about 75% of the total $1.1 billion for early-stage companies, about 15% for later-stage startups and about 10% for VC tranches earlier stage, with investments to be made not only in North America but also in Europe and Israel, a hotspot for security technology.
“Our strategy is to invest this fund in a diversified portfolio at various stages of maturity,” Seewald said. “We believe it provides private market investors with diversified exposure to cybersecurity opportunities.”
ESG will be another factor, according to Seewald.
“Evolution is committed to incorporating material environmental, social and governance (ESG) criteria into its investment processes and ownership practices,” he said. “We actively work with our portfolio companies to create diverse boards and leadership teams that bring diverse perspectives to decision-making processes, reducing the risk of groupthink and enhancing accountability.”
We’ll hold them to it.
Evolution, which has offices in Palo Alto, London and Zurich in addition to New York, was founded in 2008 by Seewald and Dennis Smith, who met while working together at cybersecurity giant AVG (now owned by Avast). . JR Smith and Karel Obluk — AVG’s former CEO and chief scientist, respectively — joined Seewald and Smith to start Evolution after AVG went public.
Evolution’s 30-person team manages approximately $2 billion in assets and has backed 60 companies to date. Her previous fund was $400 million. Among some of the company’s most successful bets are Arctic Wolf (which is planning an IPO), Talon Cyber Security (which is reportedly in talks with Palo Alto Networks for an M&A deal), Snyk, Aqua Security , SecurityScorecard and Carbon Black.
