Google’s acquisition of cloud security startup Wiz was big news last month. At $32 billion it was Google’s largest acquisition to date, and the biggest deal in cybersecurity history. For cities and regions looking to attract the next generation of tech firms to their location, it may be worth following the advice of those VC firms who backed Wiz from the beginning.
Shardul Shah, a Partner at Index Ventures, struck gold with Google’s Wiz acquisition – Index backed Wiz from Seed onwards and emerged as its largest outside shareholder with a 13% stake. Shah’s philosophy is clear: “None of us are in the business of mean reversion. I’m not seeking average returns. I’m not seeking good deals – I’m looking for outliers.”1
Cities and regions serious about attracting future unicorns must be willing to take risks and spot trends ahead of the competition. They need to operate more like venture capital firms than traditional investment attraction agencies.
Putting ideas into practice
In practice this means finding the signal within the noise – joining the dots between disparate sources such as current business news, investment announcements, and future trends to identify where a market is heading.
Using Wiz as an example, all the stories point towards a major shift in the tech investment landscape that is being driven by increased cloud adoption.
- Nine out of ten companies are now using cloud technology either on a small or large scale,2 a shift that is bringing novel cybersecurity risks through additional entry points for attack, blind spots for threat detection, and malware developed specifically for cloud systems.
- On top of this, AI has increased the frequency and sophistication of cyber threats while generative AI is creating completely new cybersecurity needs as companies seek to protect their data, models, and how employees use third-party tools.
- To counter this, startups have emerging with next-gen cybersecurity solutions. While these companies are at the early stage of development (seed/angel and Series A) they are likely to contain some of the breakout tech firms of the next few years. But how do you go about identifying them?
The next generation of cybersecurity
Research by CBInsights3 has identified some of the key emerging cybersecurity markets by looking at early-stage investment activity from 2023 (both size of funding and number of deals). This identified six technologies that should be on the watch list of any region looking to attract the next big thing in tech.
- Machine learning security – as generative AI rapidly expands companies are worried about how to protect their models and algorithms from attack. The interest from corporate venture capital signals that while firms are planning to develop their own AI models they are wary of the risks.
- Database security – the strength of AI is its ability to find new insights from data across different sources within an organisation. However, the increasing amount of data moving across applications makes it more difficult to track and maintain security.
As a result, demand is increasing for technology that protects data in the cloud and finds shadow data (data that an organisation doesn’t know exists).
- Identity and access management – as companies increasingly work across multiple cloud vendors there will be a shift towards zero-trust standards, where each entity is authenticated before being granted permission to corporate resources. Startups focussed on identity and access management have a huge potential market given that few companies are properly set up for zero-trust standards at present.
- Breach and attack simulation – while there are many technologies already in existence to test a company’s security, breach and attack simulation typically involves continuous testing to give more assurance that defences won’t become outdated. AI innovation in this area also allows systems to learn how to prepare for and fight back against threats.
- Cyber risk management – public concerns about data are driving increased regulation, and cybersecurity is not immune to the pressure. A new market is emerging to help companies better manage their security capabilities and avoid financial penalties for not abiding by regulations. Platforms that help companies meet regulations and quantify the risks are increasingly in demand.
- Security awareness training – the human element remains one of the biggest vulnerabilities to any system, and there is a market for companies that can improve the quality and efficacy of training. This is especially true as advancements in AI make cyber attacks even harder to identify.
OCO Global can help you join-the-dots between trends, funding announcements and latest news to identify the technologies and companies that could be the next Wiz. By combining research, proprietary databases, and a global network of offices, we stay abreast of emerging trends and connect cities and regions with exciting companies eager to expand internationally.
Get in touch to find out more.
1 20VC with Harry Stebbings. Shardul Shah: How Index Makes Decisions & Why Benchmarks & Averages in VC are BS https://www.youtube.com/watch?v=9Sze6f8WDSU
2 Nash Squared; Cionet (2023) Digital Leadership Report
3 CBInsights (2024) 6 cybersecurity markets gaining momentum in 2024
