Financial Experts Advise More Funding for Cybersecurity Startups

Connected devices are flooding the market, and internet capacities are being integrated into numerous everyday objects. It is forecasted that there are 6.4 billion connected devices in the world right now: From automated home gadgets and security systems to wearables and office equipment, we are surrounded by the matrix of interconnected physical entities.
While many businesses and individuals rush to stay on top of these developments, the question is how to secure the emerging structure of such magnitude, says Mark Bünger from the Lux Research. Indeed, the opportunities that cybercriminals can exploit have amassed, and a bulk of gadgets contain critical vulnerabilities serving as backdoors.

The IoT Market

The silver lining is that the wave of new cybercriminals is inducing higher levels of spending on security measures. The dynamic IoT market is undergoing a steady growth, albeit it is still relatively small. That is about to change, as in this year only, the spending on IoT security is expected to go up by 30%, reaching $346 million. Security vendors are rubbing their hands, but a whole host of startups will benefit as well.
The Afero, for example, raised $20.3 million in Series A financing round, and the Samsung Catalyst Fund has led a pack of investors. Many other small organizations are giving their best to secure the VC, and are utilizing a rich pool of metrics to pull this off. Most of the security startups are situated in the U.S, and some of them most prominent ones are in the Israel.
To illustrate this inclination, let us just take the 77 startups encompassed by a Lux Research study that have raised more than $800 million since the start of the Millennium. It is small wonder that the US is considered to be a runaway leader, with many venture finance firms acting as a backbone of the upward trends in the IoT security market as a whole.
Garter argues that by 2020, the 25% of enterprise attacks will involve the IoT framework. Therefore, companies are taking the security and privacy matters more seriously, rethinking their strategies and business models. A huge market is forming around products such as driverless cars, with the countries creating new insurance laws and new measures aimed at thwarting the hackers.
After all, the system is only as strong as its weakest link: Hacking one product potentially opens the whole system to security breaches and cyber attacks. On a brighter note, the spending on security should accelerate after 2020, when enhanced organizational structure, more polished skill sets, better consumer awareness, and scalable service options should start working their magic.

The Venture Capital's Appetite

Today, the greatest share of venture capital (VC) goes in some form of technology, and IoT is right at the center of this shift. In fact, the cybersecurity startups attracted $228 million in VC investments last year, which is amazingly a 78% increase compared to the year before that. Moreover, this trend shows no signs of slowing down.
On the contrary, the estimates are that the VC investment will peak at $400 million in the 2016. This boom is driven by the surge in the IoT sector, and the rise of the products ranging from smart appliances to industrial workplaces. Other studies have confirmed the aforementioned tendencies, and predict that the whole IoT security market will grow to $29 billion by 2020.
The majority of startups provides horizontal security platforms. In order to keep up the pace with burning issues in the field, they focus on device and network behavior analysis, as well as authentication and encryption processes. The manufacturers in many countries like UK are investing in capital IoT equipment, but are still to display a more decisive financial commitment to cybersecurity.
An even lower amount of enterprises has response plans for cyberattacks in place. This indicates that the adoption of IoT security measures is still in its infancy, and that there is a void to fill on the market— an absence of adequate solutions. The threats are constantly evolving and they do not just undermine the security of end users, but the integrity of the vital IoT infrastructure.
The time is of the essence, as some organizations are already creating advanced sensing, analytical and visualization tools tailored to individuals, communities and state-level systems. Compliance with regulation is also a necessary step, but the widespread adoption is still progressing slowly. Until the standardized and integrated solutions become a rule, not the exception, this sluggish advance will continue to pose a major hurdle on the road to the safe IoT landscape.

A Solid Business Plan

Venture capital always seeks to accomplish a nice ROI, backing up innovative business leaders, companies with a promising portfolio, and those with prudent business ideas. Thus, in the existing market, business owners must first figure out what it is that separates their organizations from the competition, and what kind of unique proposal they have to offer to the customers.
In case the market is not established, they still have much work to do explaining the unutilized potential, and how it can be harnessed with specific products and services. Furthermore, entrepreneurs need to keep a close line on the dial, a legal relationship a company has with the supply chain, providers, and venture capital. This refers to the position in the value chain, and the connection with other elements in it. For the VC, the cornerstone of the spending decision is the share of the expected profit for all participants in the chain.
Now, as for the plan itself, it holds the executive summary, company description, market analysis, marketing plan, management and organizational outline, as well as operational and financial structure. Of course, financial part is the bloodstream of the whole document, which sets up the foundations for expense management, cash flow and income statement, break-even analysis, and profit/loss projections.
Many startups manage to fund the initial stage of growth, but sooner or later, they start burning money and looking for more. The goal is to minimize the share of the company you sell, and maximize the amount of dollars you get. For both sides, it falls down to two issues: Money and control. However, the scales are often tipped towards the organization with more seasoned legal and tax advisors, in other words, the VC firms.
So, startups are at a disadvantage, and on the surface, the battle is fought over percentages. However, scratching beneath it reveals that another front is bustling with activity, the one that relates to taxes. Hence, it is best to do your homework, and find reputable partners, such as Pherrus Financial Services. These organizations help companies in avoiding tax death and other business-sinking problems.
Finally, remember that the limited liability companies are not income taxed on losses and profits, but are reflected on the owner's income tax return. The reporting here differs from the cash distribution of the profit, meaning that owners have a taxable income, yet no cash to pay for the taxes. As a result, VC representatives often advice LLCs to covert to corporations, but before making a decision, weigh all your options and consult the business plan.

Ahead of the Curve

The need for secure cyberphysical assets is increasing at a rapid rate. The IoT is one of the most lucrative and active areas for investment, and small vendors and startups are spurting dynamic patterns of innovation. Venture capital is cultivating a strong growth, evaluating the complex factors that shape the success of startups.
The security must not be an afterthought, but a top priority, and the associated risk managed with a wide array of measures, best practices and techniques. Every time a thing gets connected, it becomes a potential soft belly of the infrastructure. For all players there are still many blue oceans to explore, a long road to cover, and mountains of data to process, and an immense security fence to watch over.