Cybersecurity Market Review

Q3 2016: Market Update And Observations
The Emergence of Private Equity Firms Have Significantly Increased Strategic Activity In 3Q16.
Valuations
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Valuations increased across the board during Q3, driven by our High Growth Cybersecurity comps
which were +21%. Our Low Growth Cybersecurity comps were +10%, relative to the NASDAQ
which was +10%, the S&P 500 which was +3% and the HACK index which was +17%
Valuations have rerated over the last 12 months, but were buoyed by a strong Q3. Median forward
multiples are down 34% compared to down 50% at the end of Q2. Notables include Rapid7,
FireEye and Fortinet whose forward multiples are down 61%, 55% and 34%, respectively
Top 5 Movers in Q3
91% 68%
40%
30% 28%
Exits: M&A &
IPO Activity
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Cybersecurity M&A activity through 3Q16 reached record levels of $14.3B; total announced M&A
volume in 3Q16 totaled $7.6B and 31 Deals
There were several notable M&A transactions led by PE buyers: Vista Equity acquired Infoblox for
$1.3B, TPG acquired McAfee for $4.2B and Thoma Bravo acquired Imprivata for $488M
Carbon Black confidentially filed for its IPO with the SEC. Optiv, Tanium, Forescout, Veracode and
Tenable Network Security are all eyeing an IPO exit over the next 12 – 18 months
Investment
Activity
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Q3 saw an increase in large fundraising rounds – there were 5 deals of $50M+, led by StackPath’s
$180M investment from Abry Partners, and 10 deals between $25M-$50M
3Q16 saw funding volume total $1.3B across 80 deals, a record number of deals and the second
largest funding volume since 2010; fundraising volume YTD has already exceeded 2015
60% of deals were early stage (Seed – Series A) with a median amount raised of $4.5M; the
remainder consisted of late stage (Series B+) with a median amount raised of $20.6M
StackPath
Industry
Observations
§ Private Equity ‘s Cybersecurity: 7 deals in the sector in 2016 representing a total of $8.0B in
enterprise value have included Private Equity on one side or the other, led by TPG’s acquisition of
McAfee from Intel
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Industrial / IoT security is emerging as one of the next big destinations for investment – we are
tracking 16 companies that raised $110M in 2016, with 60% of funds ($70M) raised in 3Q16 alone
Security teams are stretched thin and struggling with vender fatigue in many cases. SOC automation
and orchestration tools are a welcomed promise if they can deliver on the hype
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