Venture Dollars Pour Into The Intersection Of AI And Cybersecurity

Just last month, AI-powered data security startup Cyera closed a $300 million Series D led by Accel and Sapphire Ventures. The deal tied Cyera for the biggest raise by a startup playing at the intersection of two of venture capitalists’ favorite industries: AI and cybersecurity.

Which other deal tied with Cyera’s Series D for the largest in the space? Cyera’s Series C, also at $300 million, back in April.

While the two Cyera rounds may be the largest, the company is far from the only cybersecurity startup using AI that has raised large sums of money.

Thus far this year, VC-backed AI cybersecurity startups have raised more than $2.6 billion, per Crunchbase data. That nearly triples the slightly more than $900 million such startups raised all of last year in almost the same number of deals.

Those dollar figures have crept up significantly since last year’s Q4, when only $121 million was raised by AI cybersecurity startups in 28 deals.

The rise of AI

While many venture investors in the cyber sector have preached patience to see how AI can be used most effectively in the industry, it seems their willingness to open their checkbooks is telling a different story.

Investors seem interested in the possibilities for startups to use AI for securing the digital world — including in areas such as data protection, identity and third-party risk — or even to help secure the development of large language models themselves.

The different uses of AI in cyber is evident when looking at some of the subsector’s biggest raises.

Cyera, for example, has an AI-powered data security platform that helps security teams at companies understand what data they have and how it’s used, as well as how to secure it across a complex digital landscape. Of course, the reliance on data has only become stronger as companies drive AI initiatives. Cyera also uses AI in its platform to assess risks a company’s data represents regarding security, privacy and regulatory compliance.

San Francisco-based Abnormal Security locked up a $250 million Series D led by Wellington Management in August that valued the cybersecurity startup at $5.1 billion. Abnormal looks to stop attacks and find compromised accounts across email and connected applications, using machine learning and AI to understand human behavior.

Another big round came just last month, when anti-ransomware firm Halcyon announced a $100 million Series C that values the company at $1 billion. Austin, Texas-based Halcyon has developed a platform that uses AI and machine learning trained on ransomware to reverse the effects of a ransomware attack — making sure businesses’ operations are never actually impacted by an attack.

Its Series C was led by Evolution Equity Partners, a busy investor in the AI cyber space that also led big rounds for Torq and Protect AI.

AI helping to secure cash

AI funding has been a big exception to the somewhat slow venture investment market, and cyber — along with other sectors such as healthcare and defense — also show how investor interest in artificial intelligence has helped lift some other industries’ funding prospects.

The adoption of AI into cybersecurity isn’t shocking considering the latter has always been open to early adoption of the newest technologies. In the past, cybersecurity quickly added automation and machine learning technology — likely as a way to help deal with worker shortages in the industry.

The same could be happening with AI, even as investors have become increasingly skeptical of startups’ claim about AI and how to monetize it.