The RSA Conference in San Francisco has come and gone, and the main feeling from venture capitalists is one of optimism as talk of dealmaking, the IPO market and of course, AI dominated the week.
Venture capitalists are optimists by nature — one has to be optimistic (among other words) to invest millions of dollars in five or six 20-year-olds who think they can do something Microsoft can’t.
That optimism was on full display at this year’s RSA Conference in San Francisco — where the cybersecurity gathering turned the city back to its pre-COVID days, with thousands of folks walking the streets of SoMa and packing bars and restaurants.
Hope and good vibes from VCs were almost as abundant as drinks. Deals like the giant $32 billion wedding of cloud security unicorn Wiz and Google parent Alphabet and cyber giant Palo Alto Networks’ move to start the show made it seems their dreams of actual DPI — distributed to paid-in capital, or the capital paid to funds’ LPs after exits by those funds’ portfolio companies — may come true this year.
The numbers somewhat support that idea. A third through the year, 32 VC-backed cyber startups have been purchased. They include cyber risk firm Vulcan Cyber and Oosto, which identifies threats in real time.
That puts it just under last year’s pace, which saw 105 cyber startups get scooped up — the best year since 2021. That, of course, included credit card giant Mastercard has agreed to buy threat intelligence company Recorded Future from Insight Partners for $2.65 billion.
However, while the numbers paint an improving picture, some world events such as war, tariffs and the looming threat of a recession point toward a more uncertain future. Most investors, however, downplayed such concerns while acknowledging their existence.
“Listen, we are optimists by nature,” said Dave Zilberman, a general partner at Norwest Venture Partners investing in cyber. “But obviously with tariffs, international relations, there is instability.”
David Palmer, general partner at Ten Eleven Ventures, a multistage global venture capital firm dedicated to cyber, said he sees the exit market picking up as well — with more unsolicited inbound calls about dealmaking happening.
Also, while the IPO market is still somewhat frozen, Palmer said his firm continues to prepare companies for when the pipeline is turned on — assuming that happens.
Nearly all investors agree the markets have not picked up in the way many hoped they would at the end of last year. Still, many believe the cybersecurity market and venture market in general are healthy when looking at both fundraising and M&A dealmaking.
“Conflict and disagreement will always exist on a geopolitical level,” said Alberto Yépez, co-founder and managing director at Forgepoint Capital, which specializes in cybersecurity and infrastructure software investments. “But right now people are willing to invest and deals are happening. I don’t believe that will change as hopefully we see more stability.”
Other things that caught our ear and eye:
Similar to last year, AI was the key talking point at the conference. However, investors were conflicted when it came to both “security for AI” or “AI for security.” Per the latter, some investors see artificial intelligence agents in places such as security operations centers significantly helping with repeatable tasks. Others see it as a tech that will easily be commoditized, with identity and fraud being main use cases.
On the other hand, security for AI seems to have a huge runway in areas such as the health and weaponization of data, but startups are few and the ones there are still young in the space. “Security for AI is much more in the embryonic stage,” Zilberman said.
Another interesting note was the IPO market. Investors still talked openly about some of their portfolio companies going public — but not this year. That hope that this would be the year the IPO pipeline would be re-opened seems all but dashed. VCs are realizing and still think going public is a possible exit for the cream of their portfolio — just not anytime soon.
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Illustration: Dom Guzman
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