Rising Budgets and Increased Deals Bring Hope Amidst Decline
In recent times, the cybersecurity sector has faced significant challenges, experiencing a sharp 40% drop in investment compared to the previous year. However, amidst this downturn, there are glimmers of hope emerging. Chief information security officers (CISOs) have reported higher budgets for the year 2024, as indicated by the cybersecurity-focused VC firm NightDragon. Furthermore, despite an overall decrease in cybersecurity investment during the first quarter of 2024, there has been an increase in the number of deals compared to the same period in 2023, according to recruitment outfit Pinpoint.
Evolution Equity Partners Launches $1.1 Billion Cybersecurity and AI Fund
On Tuesday, Evolution Equity Partners, a growth capital investment firm headquartered in NYC, unveiled a $1.1 billion cybersecurity and artificial intelligence (AI) fund. This marks the third fund of its kind in Evolution’s history. Named Evolution Technology Fund III, the fund was oversubscribed, with participation from both existing and new investors including endowments, sovereign investors, insurance companies, foundations, fund of funds, family offices, and angels.
The fund aims to make investments ranging from $20 million to $150 million in cybersecurity firms and startups that leverage machine learning and AI to develop “market-leading” platforms. Richard Seewald, managing partner at Evolution, highlighted the fund’s focus on providing support and insight to management teams and founders, covering areas such as sales and marketing, product technology, human capital, M&A, and business development, thereby facilitating their success.
Diversified Investment Strategy and Commitment to ESG
Evolution’s investment strategy for the Evolution Technology Fund III involves allocating approximately 75% of the total fund size to early-growth-stage companies, around 15% to later-growth-stage startups, and approximately 10% to earlier-stage VC tranches. Notably, the fund will not only target opportunities in North America but also in Europe and Israel, recognized as a hotspot for security technology.
Moreover, the firm emphasizes its commitment to environmental, social, and governance (ESG) principles, integrating them into its investment processes and ownership practices. Seewald emphasized Evolution’s active engagement with portfolio companies to foster diverse boards and leadership teams, aiming to enhance decision-making processes, mitigate the risk of groupthink, and bolster accountability.
With offices in Palo Alto, London, and Zurich, in addition to New York, Evolution Equity Partners was established in 2008 by Seewald and Dennis Smith, who previously collaborated at the cybersecurity investment giant AVG (now owned by Avast). Building on their experience, the firm’s 30-person team manages approximately $2 billion in assets and has supported 60 companies to date. Notable successes from previous cybersecurity investments include Arctic Wolf, Talon Cyber Security, Snyk, Aqua Security, SecurityScorecard, and Carbon Black, reflecting the firm’s track record of identifying and nurturing promising cybersecurity ventures.
