Are Cybersecurity Companies a Good Investment?
Cybersecurity is all over the news now that ransomware and hackers have gone after larger and larger targets. It makes the average persona stop and think about their own cybersecurity and what they can do to protect themselves. Now imagine that you’re a huge corporation with many customers and a significant revenue stream. The security of your network and the way you handle your data is not just a good practice it is mission critical to making sure you stay in business and protect your customers.
Cyber security is as, if not more important than the physical security of your offices, and employees. For years network and computer security, cybersecurity was treated as a nuisance cost. Everyone said you had to have it but mostly it was focused on backing up the data and preventing unauthorized employees from snooping around in files they went supposed to. When outsiders figured out ways to breach a company’s networks either directly or through social engineering, then things started to get a bit more serious. With the explosion of ransomware and state-sanctioned corporate espionage interested in cybersecurity has increased dramatically.
When you hear the term cybersecurity, you probably think of police for the online world, right? While that’s partially true, there is so much more to cybersecurity than you probably know or can even imagine.
Table of Contents
- Familiarity with governance and oversight
- Understand the technological framework
- Reporting and Analytics
- Estimated projection & foresight
Cybersecurity companies started since the internet and web-based businesses become much more popular, and they have only improved from there. Cybersecurity companies like McAfee, Norton, Cisco, and CyberArk are the main companies that offer cybersecurity services to make sure you and your business are protected from cyberattacks. These companies do more than just protecting your business online, they are always working to improve the cybersecurity space by creating things that protect your company’s digital assets. When you decide to invest in a cybersecurity company for your business, you are also investing in services such as advice from the experts, new and improved software tools, testing, vulnerability analysis, and auditing services that will help you improve the security of your business, so you never have to worry about a cyberattack.
The world of cybersecurity is growing at a rapid pace and shows no signs of slowing down. It is estimated that the cybersecurity market is going to see a major increase of almost $100 billion in 2021. Whether this be from the pandemic and more companies moving their workforce online or not, all we can say is that this is a billion-dollar market that has seen nothing but revenue increases since 2016.
More companies are realizing the threats of cyber-attacks which caused an increase of $1 trillion in cybersecurity products and services purchases, and that number is expected to grow in the next couple of years. With more people online now more than ever, this is an industry that isn’t going anywhere. To put it into perspective for you, Microsoft said they planned to invest about $1 billion each year on cybersecurity research and development in these next few years. If that doesn’t show you how much cybersecurity is increasing in the next couple of years, we don’t know what will.
While it’s likely the size of this market won’t see much of an increase in the next couple of years, the amount of revenue this market will bring makes up for that. This is because, with the recent development of IoT, new opportunities will continue to come up in big tech industries like smart cars and homes, where they will be able to establish an inter-vehicle networking systems through their use of IoT.
The COVID-19 pandemic has caused so many companies to find ways to work remotely and still give access to their employees who are working from home. While some companies could afford to give each of their employees a secured laptop, others weren’t, and some companies didn’t even have cybersecurity software setup. The world of digital economy and e-commerce saw a major increase, and with that increase came an increase in cyberattacks and cyberthreats.
More companies are realizing the threats of cyber-attacks and the need for Cybersecurity companies to save them.
The people on the other side saw this increase in online use and remote working as an opportunity to try to break into company records and steal private information. The cybersecurity companies that already existed saw this as a chance to grow and provide more services than they knew companies needed. Before the pandemic, this was a growing industry, but since the start of the pandemic, this industry has seen the biggest increase in demand and investment than most industries out there. As people still continue to work from home, the need for cybersecurity services isn’t going anywhere.
If you’re at the point where you’re considering investing in cybersecurity and you’re not sure if it will be worth your while or not, here are some things you should consider.
As an investment firm, you may not be familiar with every detail of every industry – no one is. Before deciding to invest in a cybersecurity company, you need to ensure that both you and your board are familiar with the cybersecurity strategy, procedures, and policies of the company you are looking to invest in. You should easily be able to see how they oversee risk management when it comes to the company’s cybersecurity and that they are an expert in that particular part. Another thing you need to consider or make sure happens before the investment is finalized is if the firm’s executives are constantly talking about their cybersecurity measures and are always looking for ways to improve.
You and your board should always be thinking ahead and planning out things like cybersecurity, responses, rules, regulations, and potential impacts when looking to invest in a new cybersecurity company. Once you have considered all of these things and your board is up to date on this potential investment, you can come to a group decision.
The second most important factor to consider before making an investment in the cybersecurity industry is being familiar with the firm’s technological framework. Each executive on your board should be familiar with this potential investments key systems and software’s and they should know who the services providers are and what each one of them provides. Why is this important? Whatever company you decide to invest in is what is going to either make you money or lose you money. If the provider doesn’t do what they promise they will, will your investment be worth it? You want to ensure the company you decide to invest in is going to bring you that return they promised.
Your fund board should know everything about this new potential investment and if you don’t have enough information, they will see that as a risky investment and it most likely won’t go through.
When you are determining whether you want to invest in something or not, the only thing investment firms care about the most is the data and the numbers. Data is the one thing that shows results in a way that investors like. So, if the company you are looking to invest in doesn’t have good data or analytics to show you, that’s a major red flag that this investment isn’t worth your while. When it comes to considering if you should invest in a cybersecurity company or not, the most important thing you’ll need to see before making that decision is the raw data and what that data means for the future of the company.
With the pandemic forcing more people to be and work online more than ever before, there has never been a better time to invest in cybersecurity.
With every type of investment, you should always consider what the experts are saying about your company of interest and how it’s been trending over the last couple of years. Before making the purchase of the stock, take some extra time to ask people in your network to get their thoughts and opinions on the cybersecurity company you are considering investing in.
Foresight is another important thing to consider when making a new investment. You are putting a lot of money into this company, and you want to make sure this is going to pay out for you in the future. Why invest in a company if you aren’t sure what’s going to happen to it in the next 2-5 years? If you knew it was going to fail in 3 years from now, would you still make that investment? The estimated projection is important to consider because you want to see where they think their company is heading and how much money your investment will pay out.
When it comes to which cybersecurity stocks are worth investing in and keeping an eye on, there is a lot that comes to mind. As stated earlier, cybersecurity is one of the fastest-growing industries so if you’re an investment firm looking to add a cybersecurity company to your portfolio, here are the top 5 that are worth it:
This cybersecurity company has made massive strides in the world of the cloud. This company’s main goal is to detect cyberthreats and prevent them from happening before it’s too late. Through the Falcon platform it uses, CrowdStrike has created the very first multi-tenant, cloud-native, high-tech security solution that is able to protect a massive amount of work. Projected to earn around $1.19 billion in 2022, this is definitely a stock worth looking into. It is currently trading at $268.96 per share.
Being one of the most well-known names in the world of cybersecurity, this company makes it easy for businesses to gain total control over their secure and confidential documents. Used in over 600 million households and commercial businesses, this stock is currently trading at $26.80 and continues to increase in price. Recently they signed a deal with Visa to offer holistic security solutions for those who hold a Visa credit card. They are taking strides to provide cybersecurity in more ways than just online.
Another popular name in the world of cybersecurity is CACI International. This is a computer and information technology company that has a massive portfolio when it comes to the services they offer. The biggest client this company works with is the U.S. federal government where they provide security services to the Department of Defense, Homeland Security, Intelligence, and even Health Care. If the government believes in their abilities, so should you. Currently trading at $268.63, this is a great stock to have in your portfolio.
Currently trading at $257.91 a share, this company is definitely one to keep on your radar. Being one of the top leading independent providers there is, this company allows you to organize your documents and connection your employees to the technologies they need in an extremely secure way. With over 7,000 pre-built applications and infrastructure features to keep your company safe, this company ended its first year in business bringing in $251 million and it continues to increase its profits each year.
Specializing in large data analytics, this company works with a wide variety of different markets such as the military, the health care industry, and government sectors. This is a great company to invest in while it’s trading low at only $21.81 per share, and they have plans to target smaller companies who are looking to up their cybersecurity procedures and software.
So one of the big questions I’m asked is “Should I invest in cybersecurity companies?”
When it comes to determining if investing in cybersecurity companies is worth it or not, you have to consider what investments you currently have and how much investment money you have to play around with. With the pandemic forcing more people to be and work online more than ever before, there has never been a better time to invest in cybersecurity.
With companies have to completely change the way they do their daily tasks and having to navigate working from home, cybersecurity numbers skyrocketed from the increase in cyberattacks and cyberthreats. The digital economy is growing at an insanely fast rate that has never been seen in any industry before. There are more companies will remote employees than ever before and they’ve had to completely switch to new software and web-based solutions to keep their documents accessible and private. This has been hard for some companies who may not have the funds needed to invest in cybersecurity solutions if they took a hit from the pandemic, but the big tech companies are working on cybersecurity solutions for smaller businesses who may have smaller budgets – resulting in more opportunities for growth in an industry that’s already growing at a rapid pace.
The cybersecurity industry is projected to earn at least 13 trillion dollars by 2030, so while stock is on the lower side, there’s never been a better time to buy. So, if asked “Is investing in a cybersecurity company worth it”, the answer is an absolute yes!
About the Author
Jonathan Hung is one of the most active angel investors in Southern California, his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners.
Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets.
Jonathan developed his investing prowess as a Managing Member for his family office fund, J Heart Ventures, which made investments in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, to name a few startups he funded.
Jonathan has various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.