What I look for in a cybersecurity business

We ask Chris Nixon, one of our investors in Northern Ireland, what makes a cybersecurity business attractive to investment teams.

5 April 2023

Chris Nixon is an investor in BGF’s Northern Ireland team. BGF has backed numerous cybersecurity businesses, including Dublin-based Edgescan and Oxfordshire-based e2e-assure, and we’re always on the lookout for more high-potential companies operating in this space.

In our latest investor insights piece, we ask Chris what makes a cybersecurity business attractive to investment teams. Read on to find out.

Why cybersecurity? Why now?

As technology becomes more sophisticated and those carrying out cyberattacks continue to develop and deploy new techniques, demand for cybersecurity solutions is rising rapidly. As the likelihood of these attacks increases, not to mention the negative financial and reputational impact, organisations have come to realise that cybersecurity protection is not just a nice-to-have, but a business-critical service.

This doesn’t just apply to technology firms. Cybercriminals target a range of industries, including manufacturing, transport and construction. In fact, in 2020, a UK Government report found that almost half (46%) of businesses had had a cyberattack or cybersecurity breach in the past 12 months, while 80% of senior management boards viewed cybersecurity as a “high priority” issue.

What do investors look for in a cybersecurity business?

1. An effective product

At BGF, we’re looking for businesses with an effective, and ideally proprietary, product that addresses a real-world problem. The technology itself doesn’t need to be ground-breaking, but it should provide reassurance to customers and solve a pain point. And of course, the fundamentals are critical as well, such as reliability and security of a company’s software.

2. Scalability

Given the pace with which the cybersecurity industry is evolving, we’re also looking for businesses that can outgrow the market. And while most cybersecurity companies report a mix of recurring and project-based revenues, we expect to see this weighted towards the former as time goes on.

3. Great people

We all know that a strong team is the key to any successful business. Cybersecurity firms are no different, so the expertise and reputation of teams (both management and employees) are important factors for us. It can be challenging for some businesses to attract and retain the best people, particularly in highly competitive tech markets. This is where, alongside competitive pay and benefits, company culture is important.

How does BGF support companies in the cybersecurity sector?

To date, our investments have helped cybersecurity founders to scale their businesses by funding key hires, growing their sales functions, and expanding overseas.

BGF is a long-term, minority equity partner, which means we work closely with the management teams we back, without taking away control. And we don’t stop at funding, as we also provide our portfolio with access to a global network of business experts and sector specialists, and can support with projects such as strengthening boards, developing exit strategies, succession planning or implementing an ESG strategy. Get in touch to learn more.

This article has been adapted from our ‘What makes a cyber security business attractive to investors? piece for Sync NI, published 29 March 2023.

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