It turned out to be safer without startups – Newspaper Kommersant No. 191 (7392) dated 10/14/2022

In 2022, the volume of transactions with startups in the cybersecurity segment decreased significantly, with no purchases made from January to September. A year ago, in the same period, transactions worth $400 million took place. The industry recognizes the difficulty in attracting investments, referring to the “high entry threshold” – up to 80% of the market is occupied by large participants. At the same time, sanctions risks are high in the sector, lawyers say, restrictions, as well as the mobilization announced in the country, are pushing young teams to open business abroad.

Kommersant got acquainted with the data of the Venture Guide service, launched with the support of the Moscow Innovation Agency. It follows from it that this year the volume of transactions on “exit” (attraction of financing in the project, during which shareholders sell their shares to the investor) of startups in the field of cybersecurity has decreased to zero, while in 2021 it was a total of $400 million. The total volume of investments in such projects, including venture deals, remained almost unchanged, amounting to $252 million (a year earlier, the figure was at the level of $250 million).

The Skolkovo Foundation said that according to the statistics of their cluster, now the percentage of startups in information security in relation to the number of IT startups as a whole is really small – about 8%. “This is due to industry-specific barriers: a lack of investment capital in the industry, a low degree of involvement of strategic investors, a high threshold for entering the industry, as well as competition with large players that occupy about 80% of the market,” explains Oksana Ulyaninkova, head of the fund’s promising cybersecurity projects. . However, she says, new teams are emerging.

The Russian cybersecurity market as a whole is assessed by experts as growing. According to the forecast of the Center for Strategic Research, by 2026 it may increase from 186 billion to 469 billion rubles. Among the main incentives, analysts highlight the growth of cyber attacks against the backdrop of hostilities in Ukraine and the exit from the market of almost all foreign vendors (ESET, Avast, Fortinet, etc.).

But, despite favorable forecasts, this niche in IT is still unattractive for young teams, market participants say. “Firstly, each product must be certified according to safety requirements, and this is a difficult and long path that is difficult to pass without experience,” says Nikolay Nashivochnikov, Deputy General Director of Gazinformservice. The second difficulty, according to him, is the distrust of “young” products on the part of end users who “prefer to work with proven solutions.” As a result, the first sales of developments can start after a year and a half or even more, unlike solutions from other IT areas, the expert explains. In his opinion, the rapid promotion of a cybersecurity product or service is now possible only with a mature partner.

Now companies focused on information security startups and ready to act as a strategic investor have appeared on the market, says Yaroslav Galaiko, director of strategic and investment development at RTK-Solar. “Before that, cybersecurity competed for investment with IT, fintech and other technology segments,” he says.

This year, in general, the direction of IT startups, despite the general course towards import substitution and the departure of Western players, is developing slowly. From January to August, Russian investment funds concluded only 31 deals with IT startups against 121 in the same period last year, and some funds lowered the lower investment threshold (see Kommersant on September 19).

Lawyers believe that another reason for the decline in the activity of startups was the sanctions and human factors. “The IT sector as a whole, including the sphere of cybersecurity, is on the sanctions radar — any company operating in the segment can fall under Western restrictions,” said Kira Vinokurova, special advisor on sanctions issues at Pen & Paper. In her opinion, the solution could be the creation of a company “in a neutral jurisdiction not associated with the Russian Federation.” This, the expert believes, will be facilitated by the partial mobilization announced in Russia, due to which a significant part of young specialists have already left abroad.

Tatyana Isakova