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The COVID-19 pandemic presented businesses globally with many new cybersecurity challenges. Companies in all industries were targeted and should plan for these challenges to persist and to have long-term effects. While the pandemic has had a large impact on many industries, the VC industry showed resilient VC returns. Similarly, the cybersecurity industry also proved quite "virus-resistant" as market trends remained very positive during COVID-19. In addition, global cybersecurity funding exploded to a record of $11.5 Bn in 2021.
For cybersecurity, the European market landscape looks very fragmented and regional from the outside, and many will say that Europe lacks behind large cybersecurity ecosystems in the US and Israel, where most of the largest cybersecurity companies, investors, and acquirers are based. Europe does indeed not have many large ‘cybersecurity champions’, but a strong (yet still decentral) technology and innovation and start-up landscape that has been evolving in the last ten years.
There are many cybersecurity hotspots in Europe such as in France (Rennes, Paris, Lyon), Spain (Basque Country & San Sebastian, Castille y Leon), Belgium (Wallonia), and especially several regions in Germany that receive more and more international attention worldwide. A good example here in Germany is North Rhine-Westphalia: approximately half of all cybersecurity university graduates in Germany graduate from universities in North Rhine-Westphalia. Excellent research as a basis for start-up ecosystems plays an important role, and there is a lot here in the cybersecurity field. In the NRW region alone, there are world-leading cybersecurity research institutions that have already produced many promising startups in recent years, over 30 startups in total.
NRW’s strong cyber ecosystem includes:
• Horst Görtz Institute for IT Security, known worldwide for research in cyber security
• Max Planck Institute for Cyber Security and Privacy- the first worldwide on this topic
• Cyber campus for NRW
• Cyber incubator CUBE 5
• BSI- the National agency for Federal Cyber Security Authority
• Cyber Cluster Bonn
• IFIS Gelsenkirchen
“There are interesting trends within Europe, that the governments and the EU are working on improving the European cybersecurity ecosystem and make the market more transparent as a whole.”
On a higher level, there are more and more accelerators, associations, and network initiatives on local and regional levels in Germany which also connect to European initiatives such as the European Cybersecurity Organisation (ECSO).
While the market landscape still is very complex and fragmented, Europe has great potentials and technology. There are interesting trends within Europe, that the governments and the EU are working on improving the European cybersecurity ecosystem and make the market more transparent as a whole, these efforts are spearheaded by the European Union Agency for Cybersecurity (ENISA). Europe’s cybersecurity industry has a multibillion-dollar funding gap, compared to the US and Asia. Given these circumstances, we believe that there might be the next wave of Cybersecurity Champions coming from Germany and Europe.
There are activities to foster this next wave of companies with better funding opportunities. One initiative we are supporting together with leading VCs and the European Cybersecurity Organization is to establish a European Cybersecurity fund to bridge the funding gap specifically in the cybersecurity sector. In addition, there is also a movement in the market observable as leading US VC firms are increasingly expanding into Europe where a large part of the world's seed financing takes place.
About eCAPITAL: eCAPITAL is a deep tech venture capital firm located in Germany which currently manages funds with over € 280 million under management. eCAPITAL provides early to growth-stage funding to technology companies, amongst others with a strong focus on cybersecurity, and a 100 percent cybersecurity fund.