The Colonial Pipeline ransomware attack in 2021, the Yahoo breaches in 2014, and the ongoing cyberattacks organized by Russia to disrupt Ukrainian military operations—these are some of the high-profile attacks that have established cyber warfare as a formidable threat. Now a whole generation of venture capitalists is paying attention to this fast-growing sector. "Even the stuff that we think has been solved has to be solved again, which is why cyber risk is job security for VCs," explained Bessemer Venture Partners investor David Cowan.
Indeed, while layoffs and recession fears are rippling through Fortune 500 companies, cybersecurity stands out as one place where companies are reluctant to cut back. To find out which VCs are making their mark with the most promising young companies, we talked to cyber experts, entrepreneurs, and VCs themselves. The investors featured on this list have spotted some of the biggest startups before there was a product and, in some cases, before there was even an idea. Some dealmakers have been in the industry for decades; others are rising stars.
“We're looking to invest in next-generation technology capabilities that can materially reduce the amount of labor or manual effort required to manage cyber risk across the entire cybersecurity program," said Jay Leek, partner at Syn Ventures. Leek was the head of security at Nokia globally before becoming the first chief information security officer (CISO) in private equity at Blackstone. In 2017, he started his first venture fund, called ClearSky Security, before founding Syn Ventures in 2021, which is the only venture fund to be led by two former full-time CISOs of Fortune 500 companies. Syn Ventures has spotted industry-shifting companies, like Cylance and hybrid workforce protection company Talon Cyber Security, before founders had a product or revenue.
"When I started [26 years ago], it was mostly operational issues at an enterprise that were at risk. Now it’s strategic," said Ted Schlein, founding partner at Ballistic Ventures, which is a cybersecurity-focused VC firm. "Boards of directors are forced to pay attention to cyber-risk issues; the CISO has become one of the most important executives in an organization; and spending to keep the enterprise safe has steadily increased," he added. Schlein has been a partner at Kleiner Perkins since 1996 and has backed some of the most seminal cybersecurity companies to date. Schlein led security operations company Phantom’s Series B round prior to the company being acquired by Splunk for $350 million in 2018. He was an early investor in fraud prevention company Shape Security, which was acquired by F5 in 2020.
Alberto Yépez, Forgepoint Capital's founding partner, has had a legendary career in cybersecurity as an entrepreneur, executive, private equity investor, and now venture investor. Empathy is at the core of his investing approach. “You need to gain the hearts and minds of entrepreneurs,” he explained. “I want to be the investor that I always wanted to have in my corner." Yépez was born in Peru and moved to California to attend the University of San Francisco. He co-founded Forgepoint Capital, a fund focusing on cybersecurity companies, in 2015 along with Don Dixon. As a VC, Yépez was a seed investor in threat intelligence platform AlienVault, which was acquired by AT&T in 2018. Attivo Networks, an attack prevention company that Yépez invested in, was acquired by SentinelOne in 2022. Area 1 Security, an anti-phishing email protecting service Yépez was an early investor in, was acquired by Cloudflare in the spring of 2022. Yépez emphasized his commitment to fostering greater diversity in the cybersecurity space, especially by recruiting veterans, women, and people of color.
As any cybersecurity expert will tell you, Israel is a hub of cybersecurity tech innovation. Many VCs seek out founders that have been a member of Unit 8200, Israel’s national intelligence unit, as well as entrepreneurs who have come out of intelligence networks in other nations. Prior to her career in venture, investor Iren Reznikov was an economist at the Ministry of Finance in Israel where she navigated investment treaties internationally, many of which were in the cybersecurity sector. Since jumping into venture, she has made huge key investments at YL Ventures in automotive security firm Karamba Security and cybersecurity asset management Axonius, which is valued at $2.6 billion. Now she is a partner at S Ventures, the venture arm of cybersecurity giant SentinelOne that was launched in September 2022, and leads the $100 million multistage fund investing in cybersecurity internationally. "I'm looking for flexibility of mind in founders because the startup journey is so dynamic, and no matter when you're investing in the company, things will always change," she explained.
Even among the top investors, Gili Raanan’s track record is remarkable: Of the nine initial investments he made when starting his own fund, Cyberstarts, in 2018, five have become unicorns, and the investments are now valued at $20 billion. He owes his success to one core tenet of his investing: “Product ideas are overrated, and people are underrated,” he explained. At Cyberstarts, Raanan recruits the founders first, and the team helps them hone their idea and later their product.
You can click here to read our full list of 13 VCs dominating cybersecurity.
Lucy Brewster
Twitter: @lucyrbrewster
Email: lucille.brewster@fortune.com
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