Cybersecurity Venture Capital: What Investors Can Learn from the Industry’s Top Venture Capitalists

The Investing News Network sat down with industry veteran and Seculert CEO Richard Greene to learn what venture capitalists are looking for in the cybersecurity market, and what DIY investors can learn from them.

The cybersecurity market is growing fast, with great opportunities for growth and innovation. This bodes well for individuals looking to invest in an up and coming tech market. For indeed, savvy investors don’t just want to follow trends, they want to help create them.
That’s why the Investing News Network turned to Seculert CEO Richard Greene. With over 25 years of experience in this industry, Greene knows exactly what venture capitalists are looking for in the cybersecurity space. This information is valuable for investors of all sorts, as they seek to navigate this up and coming industry.

Cybersecurity venture capital scene

Greene is quite the expert when it comes to private investment and venture capital having funded, run and sold several companies, including Securify, AppCentral, and Seculert. So what does the cybersecurity venture capital landscape look like right now? Greene explains, “in the security space, VC money hasn’t dried up. If you have the right product and there’s a market demand, you can continue to grow regardless of economic conditions.” In particular, “VCs want to invest in companies that are addressing [the] universal problem [of cybersecurity] and providing a solution to the ever-evolving threat landscape.” All told, “investors are seeing a high demand for this type of technology, and believe that demand will correlate to value creation in the equity markets.”

Future trends for the cybersecurity market

As Greene suggests, now is a strong time to invest in the cybersecurity market. The sector is growing, with increased demand, investment and innovation. He explains that “there is an increasing demand for security and no organization wants to fall victim to a breach. Furthermore, understanding the cyber threat landscape is a constant game of trying to stay ahead of the latest threats.” So what is the hottest trend right now? “Currently,” Green explains “some companies believe in either prevention or detection technologies. However, in the near future, we’ll see more organizations adopt both prevention and detection tools to address complex attacks.”

In the next five to ten years, “it will become increasingly standard for companies to have deeper visibility into who, what and where an organization is getting attacked and how to remediate the threats immediately.” Furthermore, “with the more insight into operations we will also see an increase in the need to automate processes. Moving past the automation process, we’ll see the security industry turn toward an emphasis on prediction in the coming years.”
On the attack side of things, “we keep seeing the evolution of different trends, from spear phishing years ago, to ransomware now, and we don’t know what the next security threat will be.” Ultimately, understanding how these attacks are penetrating systems, and learning from each attack, will become increasingly important across organizations.

Top tips for cybersecurity investors

There are many factors that investors should assess when contemplating investing in a cybersecurity company. Greene breaks down his top three investing tips simply:

  1. Investors should look to back a company that addresses or solves a specific problem in a unique manner that impacts the broader industry.
  2. Investors should understand the appetite across industries for that specific product or service.
  3. Venture capitalists must understand that a very small percent of their portfolio companies will ever enter the public funding markets and, if successful, will be acquired by a bigger player. This puts pressure on startups to be able to articulate not only a customer value proposition, but a value proposition for the companies that are active in the “roll up” market.


Seculert looking to the future
So what is Greene up to right now? The cybersecurity veteran is currently helming Seculert, a private cybersecurity company based in Santa Clara that provides attack detection and analytics solutions to global enterprises. In his own words, “Seculert utilizes machine learning-based log analytics and proprietary threat intelligence to automatically detect cyber attacks inside the network, revealing exactly which devices and users are comprised. This allows big enterprises to test, measure and prove the effectiveness of their threat prevention systems without having to deploy additional staff, hardware or software.”
When asked if Seculert might be poised for a future IPO, Greene hedges. He explains that “right now, Seculert is focused on growth. We have some big things planned and our priority right now is keeping our customers happy and pushing the business forward. Like any startup, we’re open to opportunities – it’s all about what’s right for our customers and the business.”
Investors, too, should be focused upon opportunities. And, as this interview with Greene illustrates, the cybersecurity industry today is a prime place of opportunity.
Don’t forget to follow us @INN_Technology for real-time news updates.
Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.

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Worldwide increases in violence and civil unrest demonstrate the need for less-lethal security solutions and governing safety measures that are not isolated to one part of the world or one nation.

2020 saw an unprecedented level of civil unrest and mass demonstrations in the name of social justice and political corruption. Despite some attributing this year of tumultuous public protest to the increased stress and uncertainty brought on by the COVID-19 pandemic, a spike in violent demonstrations around the world is not a random occurrence.

According to the Global Peace Index, peacefulness has declined by 2.5 percent since 2008, with 81 GPI countries recording a deterioration. Likewise, while 43 countries reported lower levels of terrorism in 2020, a staggering 97 countries stated an increase. In an attempt to tackle growing violence and the need for crowd control, government bodies, military organizations and public institutions are calling for non-lethal security solutions for public safety.

This increase in violence worldwide means that security solutions for public safety are a growing market that continues to attract increasing amounts of investment in less-lethal security. With the global less-lethal weapons market expected to reach US11.9 billion by 2027, investing in this line of security and public safety suggests significant upside potential for investors.

Defining less-lethal devices

Less-lethal devices or security solutions refer to technology devices that are designed to be less likely to cause death when deployed against people. These less-lethal alternatives to more conventional weapons like firearms have two primary applications: crowd control and one-on-one-suspect apprehension.

For each of these situations, technology subcategories exist based on the technology modalities, such as chemical, kinetic and conducted energy. Again, these technologies can be separated into two dominant types, direct contact weapons, like batons or chemical agents and directed energy weapons like handheld Tasers or weaponized sound waves.

These technologies are designed to have impacts that are generally temporary in nature or reversible effects. When law enforcement or military forces need to quickly disperse large crowds or disable precision targets, less-lethal weaponry is often effectively deployed.

Tactical defense and security companies like Axon Enterprise (NASDAQ:AXON), KWESST Micro Systems (TSXV:KWE,OTCQB:KWEMF) and Byrna Technologies (NASDAQ:BYRN) demonstrate versatility in less-lethal weaponry and technology devices. The KWESST Micro System is bringing to market the world’s first cartridge-based non-lethal firing system (named the Low Energy Cartridge “LEC” system ) with universal application across four market segments that currently use a variety of dated “less-lethal” solutions. Meanwhile, Wrap Technologies (NASDAQ:WRAP), created the less-lethal BolaWrap, an innovative new form of remote handcuffs that allow police officers to restrain individuals from a distance.

For police and military applications, employing these tools not only have real-life micro implications on the ground but more macroeconomic relevance as well.

Worldwide investment in less-lethal weapons is growing

Violence continues to have a significant impact on economic performance around the globe. Rises in civil unrest and organizational infighting pose significant risks to political stability and industries at every level. Investing in the technologies to combat this violence is no longer investing in a small niche market.

Market research for the U.S. estimates the nation’s less-lethal weapons market was over US$2.2 billion in 2020 alone. After years of highly publicized police shootings lining popular news headlines domestically and internationally, the political powerhouse continues to see rising levels in explosions of intense protest.

The high-profile deaths of George Floyd and Breonna Taylor in 2020 sparked unprecedented global strife and angry outcries for justice and police reform. Violent clashes between law enforcement and protesters for months demonstrated that despite significant investment into military spending, these less-lethal weapon projections come at no surprise.

Governments want to avoid unnecessary deaths. Public entities and activist organizations are pushing for less lethal tactics with the additional mounting pressure from onlookers from those in the international community.

These political protests have not been isolated to the U.S. Police shootings have become catalysts for heated demonstrations and escalated public violence worldwide. News media have depicted how violence at these levels can devastate entire cities and economic infrastructures. Applying less-lethal alternatives can be effective crowd control when force is necessary.

Following the U.S., China is forecasted to reach an estimated less-lethal weapon market size of US$2.1 billion in the year 2027, trailing a CAGR of 6.4 percent through 2027. Likewise, market research expects European markets, excluding Germany, will reach US$2.1 billion in the same time frame.

Shifts in less-lethal technology adoption

Independent task forces and legislative initiatives are making significant strides in legitimizing the use of less-lethal weapons and technology devices. Recommendations to administration according to the Council on Foreign Relations outline research and development on clear guidelines for weapon employment and leadership and coordination of this process among military services.

In violent situations, providing law enforcement and military personnel with the tools to protect not only the public but themselves is vital for any governing body. Competitors in the less-lethal weapons and defense space like AMTEC Less-Lethal Systems Inc. and KWESST Micro Systems Inc. are innovating new devices and effective security solutions for proactive public safety efforts.

The market for less-lethal products is a recurring multi-billion-dollar opportunity. Customers continue to seek better solutions as many legacy systems can be lethal, and frequently are unreliable. Thousands of fatalities have been recorded from existing cartridge-bases systems, including conducted energy devices such as Taser. Other legacy products that are “less” lethal typically fire from air guns, which are inherently unreliable as they are affected by ambient temperature and involve high-maintenance including as a result of air seals and “O” rings drying out and bursting, causing catastrophic failures. Air-based systems also entail a long logistics tail of compressors, air tanks and spare parts.

KWESST’s LEC system solves these problems with the proven reliability of a cartridge-based system in a low-cost firing platform that fires only LEC cartridges. The firing platforms are offered in various patterns that replicate the look of a real firearm, or avoid the appearance of a firearm altogether, at the user’s choice. The proprietary LEC cartridge automatically stabilizes the projectile for accuracy and distance, with an energetic actuator that controls velocity and muzzle energy well below lethal levels, and with no need for gunpowder or conventional propellant. The system’s soft frangible projectiles come with various payloads, including coloured marking agent, inert powder or a safe but powerful irritant powder that temporarily incapacitates subjects.

These less-lethal security solutions bring law enforcement into the modern age. With a growing militarization of police forces, investing in these high-tech devices and tools can present a notable economic advantage and serve a great purpose for preventing and organizing the de-escalation of violence.

Takeaway

2020 has shown that there is a rising demand for crowd control and other security solutions to ensure public safety. Worldwide increases in violence and civil unrest demonstrate this need for less-lethal weaponry and governing safety measures is not isolated to one part of the world or one nation. The growing less-lethal tactical weapons market presents investors with significant exposure to this expanding market and presents an upside potential that stands unprecedented in the coming years.

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Here are the 10 top cybersecurity companies that are publicly traded, according to the latest data from Cybersecurity Ventures.

Cybercrime is a growing concern, and it’s estimated that cyber criminals will cost businesses US$10.5 trillion annually by 2025, up from US$3 trillion in 2015. The top cybersecurity companies are working to mitigate those expenses.

With that in mind, the Investing News Network (INN) is profiling the 10 top public stocks on Cybersecurity Ventures’ most recent list of 150 cybersecurity companies to watch.

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Why is cybersecurity important? Find out why companies and investors need to pay attention to this growing market.

Cyber attacks are a growing problem for individuals, businesses and governments alike. Still, many ask the question, “Why is cybersecurity important?”

For starters, the proliferation of cyber attacks is increasingly causing damage to diverse entities. No organization or industry is safe from cyber threats, but the most targeted include the healthcare, financial services, energy and pharmaceutical industries.

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gold bars

2020 was a banner year for gold-backed ETF inflows, but interest has lagged this year as investors become more comfortable taking risks.

In 2020, gold-backed exchange-traded fund (ETF) inflows ballooned to an impressive 877 tonnes, marking the largest one year intake in ETF history.

Investor appetite was fueled by economic stimulus mixed with concerns about COVID-19 closures, which together brought risk-averse buyers to the yellow metal in droves, propelling investment demand.

"Over the first three quarters of 2020, gold ETFs accounted for almost two-thirds of total investment demand," notes a monthly ETF report released by the World Gold Council (WGC) in January.


"This is significantly higher than any previous full year. Gold ETF demand was also equivalent to a quarter of the average annual gold mine production over the past five years."

Since then, gold ETF demand has waned as investors become more comfortable taking risks. So far, 2021 has seen outflows of 269.1 tonnes compared to 87.6 tonnes of inflows. Of the first 10 months of the year, six registered net outflows from the ETF segment.

In fact, a large part of gold's muted Q3 price performance has been attributed to a 7 percent decline in demand coming largely from the ETF segment. This trend continued in October, when gold ETF holdings shed 25.5 tonnes.

"Global gold ETF holdings fell to 3,567 tonnes (US$203 billion) during the month — notching year-to-date low levels — as investor appetite for gold diminished in the ETF space following price declines in August and September," an October WGC gold ETF report states.

After two months of pressure pushed the gold price to a six month low at the end of September, October saw the metal begin to rebound from the US$1,750 per ounce range to US$1,819.

Adam Perlaky, senior analyst at the WGC, told the Investing News Network (INN) that gold's price positivity in October was largely driven by growing inflationary tones.

"In recent years, gold has been inversely correlated with nominal interest rates, and yet gold strengthened during the month despite higher nominal rates," he said via email. "This is likely a result of rising inflation expectations, though changes in the relative move in interest rates may have had an impact."

He added, "Though higher rates could be a headwind for gold, broader concerns of inflation and a potential recession highlight gold's value as an effective portfolio hedge."

The role of gold amid uncertainty

Gold's use as a hedge against inflation is likely to come into focus in the coming months, a sentiment that was echoed by Juan Carlos Artigas, head of research at the WGC.

Artigas explained that while some are of the belief that the "elements of high inflation we've seen so far are transitory" and will dissipate, there will be longer-term reverberations from the current inflation, and potential secondary effects from the fiscal and monetary policies that were put in place to restart the economy.

In mid-November, JP Morgan (NYSE:JPM) said it anticipates that the US Federal Reserve will raise rates in September 2022 by 0.25 percent, followed by 25 basis point increases on a quarterly basis until real rates hit zero.

"Gold still can face headwinds from potentially higher interest rates," said Artigas.

"(The) opportunity cost of holding gold is one of the drivers of performance, and especially in the short and the medium term, interest rates tend to influence gold's behavior significantly, especially in a period where investors are looking to understand how central banks will behave."

However, as the head of research at the WGC pointed out, there are also some tailwinds that could move gold higher, including inflation that may not be transient, but more structural.

He also pointed out that interest rates are still historically very low, which has pushed investors to make their portfolios more risky. Hedging against this type of exposure is positive for gold's investment side. Additionally, on the consumer side, US infrastructure spending could also serve as a catalyst to more gold upside.

"What we know historically is that better economic growth tends to support consumption of gold, whether it is in the form of jewelry or technology, and 2021 is a good example of that, where you saw the contraction in gold-backed ETF holdings, you (also) saw an increase in demand coming from jewelry, technology and even bar and coin investment," Artigas commented to INN.

Another factor the researcher is watching is central bank gold holdings, which are on track for a 12th consecutive year of inflows. Artigas noted that a 2021 survey of central bankers conducted by the WGC found that the monetary institutes are interested in "expanding the role that gold has in foreign reserves."

"We do expect central banks to continue to be net buyers," he said, adding, "We have seen investors, especially more strategic longer-term investors, taking advantage of the price pullback that we saw in previous months as an opportunity to add gold to their portfolios."

For investors wanting to look at the strategic role gold has played throughout history, the WGC recently released a five part documentary series titled The Golden Thread.

The price of gold was at the US$1,790 level on November 25.

Don't forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Commercially viable scandium deposits are rare, making widespread use of the metal tricky. However, there is indeed opportunity in the space.

Scandium is a critical metal that is as strong as titanium, as light as aluminum and as hard as ceramic.

While it is more abundant than lead, mercury and all the precious metals, there are no pure scandium-producing mines. The rare earth element is often a by-product, produced from refining other metals, including uranium.

Pure scandium metal rarely concentrates at higher grades alongside other metals, making commercially usable scandium deposits very rare. What's more, even when scandium is found at elevated levels, processing it can be difficult, leading to very few stable sources of this critical metal.


Not surprisingly, that means there has been very little adoption of scandium in commercial applications. However, as John Kaiser of Kaiser Research has pointed out several times in the past few years, as well as more recently, that doesn't mean there hasn't been research into how scandium could be used in the future.

"Hundreds of applications (have been) filed, many of them related to alloys with aluminum," he said in an interview with the Investing News Network. "This obscure metal is going to go ballistic in the next few years."

Kaiser made that statement a few years back, and scandium has yet to go ballistic. But he still has hope for the metal, and it could yet have its day in the sun.

Below is an overview of the scandium market. Topics covered include current production, newcomers to the space and the metal's potentially bright future.

Current scandium production

The first known large-scale scandium production was associated with Russian military programs. Details are lost to history, but Russians reportedly alloyed the metal with aluminum to make lightweight MIG fighter parts. Mining at these historic Russian production sites has ceased, but stockpiles of scandium oxide and scandium master alloy remain in Russia. These stockpiles are rumored to be dwindling, but continue to be offered for sale on the market.

Today, most scandium is produced as a by-product during the processing of other ores, such as uranium or rare earths, or recovered from previously processed tailings. As a result, scandium supply can be affected by the supply and demand dynamics of the metals it is produced with. That can make the metal's already tough-to-follow market dynamics even more difficult to understand.

According to the US Geological Survey, scandium-producing countries include China, where it is a by-product of iron ore, rare earths, titanium and zirconium; and the Philippines, where it is a by-product of nickel. Scandium is also produced as a by-product of uranium in Russia, Ukraine and Kazakhstan.

More US production could be on the horizon as well after a push in legislation that encourages the Department of Defense to look into the potential uses of the metal. Environmental and construction permits have been approved for NioCorp's (TSX:NB,OTCQX:NIOBF) polymetallic Elk Creek project with probable reserves estimated to be 36 million tonnes containing 65.7 parts per million scandium.

Scandium resources have been identified in minerals-rich regions across the world, most notably in Australia, where a number of junior mining companies are working to develop scandium deposits in New South Wales. These include Scandium International Mining (TSX:SCY), which controls the Nyngan project; Clean TeQ Holdings (ASX:CLQ,OTCQX:CTEQF), which holds the Sunrise project; and Platina Resources (ASX:PGM,OTC Pink:PTNUF), which is working on the Owendale project.

Scandium price and trading

The US Geological Survey states that the global scandium market is "small relative to most other metals." This is exemplified by global production and consumption, which is only an estimated 15 to 20 metric tons annually.

The US Department of Commerce and the International Trade Commission do not have specific data on trading for the metal. Furthermore, there is no formal buy/sell market today — scandium is not traded on an exchange and there are no terminal or futures markets.

Instead, the metal is traded between private parties, mostly at undisclosed prices and in undisclosed amounts. Therefore, understanding the precise volume of production and cost of scandium is difficult, and independent estimations are more relevant.

Production estimates are based on levels of trader activity and interest, as well as the knowledge that some traders deal in the critical metal from very small operations.

The estimates also include consumers believed to be sourcing their own scandium through small, controlled recovery operations, but don't consider amounts of the metal contained in the master alloy currently being sold from Russian stockpiles.

The scandium opportunity

Analysts expect the global scandium market to grow at a compound annual growth rate of above 11 percent between 2020 and 2025. "The major factors driving the growth of the market studied are the accelerating usage in solid oxide fuel cells, and the rising demand for aluminum-scandium alloys," notes ReportLinker.

Despite the lack of known, stable supply, scientists and engineers have been working hard to develop new products incorporating the metal. Scandium's potential in high-tech applications is well documented. Highlights of the metal's properties include:

  • It can be used in the creation of stronger, corrosion-resistant, heat-tolerant and weldable aluminum alloys for lightweight aircraft and automobiles.
  • Its outstanding electrical properties and heat resistance are valuable for solid oxide fuel cells.
  • It has unique optical properties for high-intensity lamps.

A recent Kaiser Research report on scandium details the wide variety of end uses for scandium now and into the future, as well as where potential supply to meet that demand may originate.

potential scandium oxide supply and demand

Potential scandium oxide supply and demand.

Kaiser Research

As Kaiser has explained, "There's an enormous latent demand for scandium if it ever became available on a primary, scalable basis."

In other words, the only barrier to accessing demand from a new family of high-performance aluminum materials and energy/lighting products is the lack of commercially viable larger-scale scandium production. Interestingly, Kaiser's work highlights two important scandium market events that may "have the potential to launch scandium demand growth over the next decade towards a 1,000 (tonne per annum) market worth US$2 billion."

For one, Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) announced in 2020 that it has developed a route to recovery for scandium at its Sorel-Tracy facility in Quebec, where it produces titanium slag from the Lac Tio iron-titanium deposit. In mid-2021, Rio Tinto began commercial-scale operations at its new scandium oxide production facility.

"The Rio Tinto development is a game changer for the scandium sector," said Kaiser, who believes the increase in scandium production could help boost the sector.

Secondly, Scandium International Mining filed an application in late 2019 for a patent protecting a method for recovering scandium and other metals from the waste streams of copper oxide leaching operations. In mid-2020, the company announced that copper raffinate tests showed its patent-pending process could recover enough scandium to match the supply being added to the market by Rio Tinto.

"Conditions are finally right for scandium to become the ideal lightweighting solution for aluminum," Kaiser said in his note to investors.

This is an updated version of an article originally published by the Investing News Network in 2014.

Don't forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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