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It’s a paradox: Cyberattacks against governments, companies and individuals are escalating dramatically, lifting cybersecurity spending to a record. And yet there are so many cybersecurity startups competing with each other—and with bigger tech companies such as Microsoft and Palo Alto Networks—that a shakeout in the sector is seen as inevitable.
At the very least, some startups will have to accept a big cut to their valuation if they want to raise money. A good example is Israeli cybersecurity startup Noname Security, which raised $135 million in 2021 at a $1 billion valuation. At the time, the company was generating just $3 million in annual recurring revenue, a person familiar with the matter said. Today, with its ARR around $40 million, it is gearing up to raise money again, according to a person familiar with the situation. But it will likely have to do so at a significantly lower valuation than its 2021 level, according to several cybersecurity investors.

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