So far in 2023, the cybersecurity sector has faced some challenges that have impacted investment and growth within the industry.
Despite this, however, the growing importance of robust cybersecurity measures, coupled with the increasing adoption of digital technologies across sectors, presents significant opportunities for growth. This means the long-term outlook for the cybersecurity industry remains positive.
The cybersecurity industry is poised for significant growth over the next decade. The global cybersecurity market is projected to experience substantial expansion, fueled by the integration of advanced technologies such as IoT, machine learning, and cloud-based systems.
Challenges Confronting the Cybersecurity Sector
According to market research reports, the first half of 2023 saw a decline in overall investment in the cybersecurity sector compared to the previous year. Funding rounds and venture capital investments showed a more cautious approach from investors, leading to a decrease in the total capital raised.
According to Pinpoint Search Group, cybersecurity companies raised $1.9 billion through 97 funding rounds in Q2, down 35% from the $2.9 billion raised in Q1. It was also down 55% for the same quarter year-over-year. Financing deals and mergers and acquisition (M&A) were also down in Q2.1
However, it’s worth noting that the decline doesn’t indicate a lack of interest or potential in the industry. Indeed, market research firm IDC expects that total spending on cybersecurity products and services across the economy will pass $219 billion this year, representing growth of 13% from 2022.2 Rather, the investment slowdown reflects a changing investment landscape.
Economic uncertainty and recent spiking inflation have had impacts on the cybersecurity sector, too. Inflationary pressures can lead businesses and investors alike to reduce their overall cybersecurity spending, despite the vulnerabilities this opens up.
Within the last year, the number of victims paying ransomware increased from 21% to 85%. In 2022 alone, attackers extorted $456.8 million from victims. Total costs of cybercrime are predicted to be $8 trillion this year and $10.5 trillion by 2025, with 60% of companies going out of business within six months of a cyberattack.3 So clearly, despite an investment slowdown, the threat posed by cyber attack isn’t going anywhere.
While the year-to-year differences in investment and VC funding in the cybersecurity sector reflect a more cautious approach from investors, given these statistics it’s important to consider the broader context.
The industry’s fundamental importance in an increasingly digital world hasn’t changed. And coupled with the ongoing evolution of cyber threats—particularly the peril of AI-enhanced threat actors as well as the promise of AI-assisted cybersecurity—presents opportunities for continued growth and innovation.
In the near term, industry observers expect to see investment rebound in the second half of 2023 and into 2024, with M&A activity picking up, as well.4
And in the longer term, as threat actors become more sophisticated and cyber incidents grow in scale and complexity, the need for continuous investment in research and development, innovative technologies, and talent acquisition in this sector will only grow.
Growth Projected for Cybersecurity Over the Next Decade
The cybersecurity industry is poised for significant growth over the next decade, with the critical importance of robust cybersecurity driving demand for innovative solutions and services.
The global cybersecurity market is projected to witness remarkable expansion, reaching nearly $425 billion with a CAGR of 13.8% by 2030 according to some estimates. The rise of enterprise security solutions in manufacturing, banking, financial services, and insurance (BFSI), and healthcare are expected to be significant factors in driving this growth.5
Other industry watchers project even greater success for the cybersecurity market in the next ten years. According to Market.us, the global cybersecurity market will be worth more than $534 billion (up from $193 billion in 2022), driven by the needs of e-commerce platforms, IoT devices, cloud security, and AI.6
Forecasts also project substantial growth in various subsegments of the cybersecurity sector. The industrial cybersecurity market, for instance, is expected to surpass $40 billion by 2030, more than double the current size of the segment. The growing adoption of IoT and cloud technologies in industrial settings has contributed to the rising demand for industrial cybersecurity solutions, as threat actors increasingly target industrial control systems and operational technology.7
The cybersecurity industry offers immense growth opportunities fueled by escalating cyber threats and the increasing recognition of the importance of protecting sensitive information. By capitalizing on emerging technologies, focusing on industry-specific solutions, and fostering collaborations, organizations can position themselves to thrive in this rapidly evolving market and effectively address the cybersecurity challenges of the next decade.
Diversified Investing in Cybersecurity with CYBR ETF
A cybersecurity ETF offers a great alternative to gaining exposure to this industry without being locked into any single security and without the hassle of hand-picking individual stocks. ETFs allow you to diversify by investing in multiple companies in multiple markets, ensuring that a single market shock won’t tank your portfolio.
Canada’s first cybersecurity ETF, Evolve Cyber Security Index Fund (TSX Ticker: CYBR), invests in global companies involved in the cybersecurity industry.
For more information, visit the fund page here: https://evolveetfs.com/cybr/.
1. Vijayan, J., “Analysts: Cybersecurity Funding Set for Rebound,” Dark Reading, July 10, 2023; https://www.darkreading.com/operations/analysts-cybersecurity-funding-uptick-2h-2023
2. “New IDC Spending Guide Forecasts Worldwide Security Investments Will Grow 12.1% in 2023 to $219 Billion,” IDC, March 16, 2023; https://www.idc.com/getdoc.jsp?containerId=prUS50498423
3. “The impact of inflation on cybersecurity,” RFA, June 30, 2023; https://rfa.com/news-and-insights/thought-leadership/the-impact-of-inflation-on-cybersecurity/
4. Vijayan, J., “Analysts: Cybersecurity Funding Set for Rebound,” Dark Reading, July 10, 2023; https://www.darkreading.com/operations/analysts-cybersecurity-funding-uptick-2h-2023
5. “Global Cyber Security Market Size [2023-2030] to Reach USD 424.97 Billion and Exhibit a CAGR of 13.8%,” Fortune Business Insights, April 19, 2023; https://www.globenewswire.com/news-release/2023/04/19/2649842/0/en/Global-Cyber-Security-Market-Size-2023-2030-to-Reach-USD-424-97-Billion-and-Exhibit-a-CAGR-of-13-8.html
6. “Cyber Security Market Size Is Valued At US$ 534 Bn by 2032: Data Analysis by Experts at Market.Us,” GlobalNewswire, March 23, 2023; https://www.globenewswire.com/en/news-release/2023/03/23/2632956/0/en/Cyber-Security-Market-Size-Is-Valued-At-US-534-Bn-by-2032-Data-Analysis-by-Experts-at-Market-Us.html
7. Kovacs, E., “Industrial Cybersecurity Market Expected to Soar in Next Decade,” SecurityWeek, October 18, 2022; https://www.securityweek.com/industrial-cybersecurity-market-expected-soar-next-decade/