What do investors look for in a cybersecurity business?

We’ve already backed numerous cybersecurity businesses across the UK and Ireland, from Oxfordshire-based e2e-assure to Dublin-based Edgescan. And we’re always on the lookout for more high-potential companies operating in this space. Here, we explore what makes a cybersecurity business attractive to investors, for founders preparing to fundraise.

Why cybersecurity? Why now?

As technology becomes more sophisticated, and those carrying out cyberattacks continue to develop and deploy new techniques, demand for cybersecurity solutions is rising rapidly. And as the likelihood of these attacks increases (not to mention the negative financial and reputational impact), organisations have come to realise that cybersecurity protection is not just a nice-to-have, but a business-critical service.

This doesn’t just apply to tech companies. Cybercriminals target a range of industries, including manufacturing, transport and construction. In fact, in 2020, a UK Government report found that almost half (46%) of businesses had had a cyberattack or cybersecurity breach in the past 12 months, while 80% of senior management boards viewed cybersecurity as a “high-priority” issue.

What we look for in a cybersecurity business

To date, our support has helped cybersecurity founders to grow their businesses in a number of ways, such as funding key hires and scaling their sales functions. But what is it that our team looks for, when deciding whether to invest?

1. An effective product

Our investors are looking for businesses with an effective, and ideally proprietary, product that addresses a real-world problem. The technology itself doesn’t need to be ground-breaking, but it should provide reassurance to your customers and solve a genuine pain point. And of course, the fundamentals are critical as well, such as the reliability and security of a company’s software.

2. Scalability

Given the pace with which the cybersecurity industry is evolving, we’re also looking for businesses that can outgrow the market. To ensure long-term growth, while most cybersecurity companies report a mix of recurring and project-based revenues, we expect to see this weighted towards the former as time goes on.

3. Great people

We all know that a strong team is the key to any successful business, and cybersecurity firms are no different. So, the expertise and reputation of your team (both management and employees) are important factors for us. It can be challenging for some businesses to attract and retain the best talent, particularly in highly competitive tech markets; this is where, alongside competitive pay and benefits, company culture is so important.

How can BGF support your cybersecurity business?

As a minority equity partner, we work closely with the management teams we back, providing investment without taking control. And we don’t stop at funding; we also provide our portfolio with access to a global network of business growth and sector specialists, alongside our in-house experts. They can support with a range of growth strategies, like:

• Succession planning
• Developing exit strategies
• Expanding internationally
• Implementing an ESG strategy

Get in touch with the team here to learn more.

This article has been adapted from our original piece in Sync NI (March 2023).