MGCS Panelists Predict Move toward Consolidation in Cybersecurity Industry
The cybersecurity industry is undergoing rapid changes that are remaking the competitive landscape, said a panel of experts at the 2018 Michigan Growth Capital Symposium.
With new breaches occurring nearly every day, a growing number of retailers, Internet companies, banks, hospital systems and other large organizations with valuable customer data are realizing they can no longer defend their networks from intrusion, because it is nearly impossible to keep hackers out, according to Jonathan Murray, managing director at Draper Triangle.
“Now it is possible to predict and mitigate breaches in ways it hasn’t been in the past,” he said. “Companies are turning to predictive and proactive solutions to get out ahead of the hackers in this perpetual cat-and-mouse game.”
“We’ve seen tremendous growth and an onslaught of companies in cyberspace,” reported Rob Owens, managing director and equity research analyst at KeyBanc Capital Markets. He estimated that 4,000 new startups are competing with each other for customers, revenue and financing.
“We’re seeing the pendulum shift toward consolidation in the cybersecurity industry because of the noise,” Owens added. “It’s getting more difficult for startup companies [to enter the market].”
Rodney Davenport, chief technology officer at Michigan’s Department of Technology, Management and Budget, said cybersecurity startups face considerable barriers, such as insurance requirements and background checks, which make it difficult to procure contracts with the state.
“We don’t like to roll the dice with taxpayers’ dollars,” he remarked. “My job is to protect the cheese not the mousetrap. While emerging predictive technology is attractive, it is difficult to carve out a track. We can extract more value from a suite of tools.”
The panelists offered advice and strategies to help cybersecurity startups cut through the noise and gain traction:
- Understand your customer ─ “Venders don’t understand the problem we are trying to solve,” said Scott Vowels, chief information security officer at Comerica Bank. “Often they try to talk me into a solution to a problem I don’t have, and they want us to change our architecture to fit their solution.”
- Align with larger channel partners ─ “We make sure we participate with strategic partners who take us to the table,” remarked Jeff Schumann, co-founder and CEO of Wiretap. “We also bring on people from the client’s enterprise, so we are assured of having a good fit with a Chase or Comerica environment.”
- Scale quickly ─ Cybersecurity startups can differentiate themselves via “customer scale, revenue numbers and who your backers are,” noted Owens.
From the sell-side, cutting through the noise is only one part of the deal, Davenport insisted. “A company has to be able to provide the security,” he said. “Offering tools with more self-learning features is attractive, because we are limited on staff.” Panel presented by Draper Triangle Ventures