Recent events have presented challenges for cybersecurity, with a dramatic 40% decrease in investment in the sector compared to the same period last year. However, there are encouraging indications of a potential recovery on the horizon.
A significant majority of key information security officials have reported increased expenses for 2024, as highlighted by NightDragon, a venture capital firm specializing in cybersecurity. Furthermore, Pinpoint, a recruitment agency, noted a rise in job offers despite a lower overall investment in the security industry in Q1 2024 compared to Q1 2023.
In response to this landscape, Evolution Equity Partners, a growth equity investment firm headquartered in New York City, recently unveiled a $1.1 billion security and artificial intelligence fund. This fund, named Evolution Technology Fund III, marks a milestone as the latest addition to Evolution’s portfolio.
The oversubscribed fund garnered contributions from various entities including existing and new assets, sovereign wealth funds, insurance companies, foundations, fund-of-funds, family offices, and angels. Richard Seewald, the managing partner at Evolution and one of the firm’s founders, disclosed that the fund will target investments ranging from \(20 million to \)150 million in cybersecurity companies and startups utilizing machine learning and AI to develop cutting-edge platforms.
According to Seewald, the investment span of Evolution Technology Fund III has already commenced, with plans to support fifteen prominent security companies within a 12-week period. The fund aims to invest in a diverse portfolio of up to 30 companies, providing strategic guidance in various aspects such as sales, marketing, solution systems, human capital, mergers and acquisitions, and business development to foster their growth.
Evolution’s strategy with the Technology Fund III involves allocating approximately 75% of the total $1.1 billion for early-growth-stage businesses, 15% for later-growth-stage enterprises, and 10% for early-stage venture capital tranches. The investment opportunities will not be limited to North America but will also extend to Europe and Israel, recognized as a prominent hub for security software development.
Seewald emphasized the importance of Environmental, Social, and Governance (ESG) considerations in Evolution’s investment approach, highlighting their commitment to integrating these criteria into their investment processes and ownership practices. By promoting diverse boards and management teams within their portfolio companies, Evolution aims to enhance decision-making processes, mitigate groupthink, and bolster accountability.
The Evolution team, which includes Seewald and Dennis Smith, who previously collaborated at AVG (now under Avast), established the firm in 2008, with offices in Palo Alto, London, Zürich, and New York. Following their tenure at AVG, they partnered with J. R. Smith, the original CEO and chief scientist at AVG, to launch Evolution.
Managing approximately \(2 billion in assets, Evolution has supported 60 companies to date, with their previous fund amounting to \)400 million. Some of their notable investments include Arctic Wolf, Talon Cyber, Snyk, Aqua Security, SecurityScorecard, and Carbon Black.
