By Chris Nixon, Investor, BGF
It probably won’t have escaped your attention that the cyber security market has seen rapid growth and a raised profile in recent years. With the rising demand for scalable IT infrastructure and cloud-based solutions, the emergence of e-commerce platforms, and the digitalisation of most aspects of daily life, businesses are aware that the risk of cyber-attacks is increasing.
The financial and reputational stakes of having sensitive data or systems compromised are high and organisations across the private and public sectors are increasingly realising cyber security protection is not just nice to have, it’s a business-critical service. It’s not just tech firms who are investing in protection either – bad actors are also targeting the manufacturing, automotive, transport and construction sectors, where hacks can have a direct impact on people’s safety.
In 2020, the UK Government reported that 46% of UK businesses suffered a cyber-attack and 80% of senior management say cyber security is a “high priority”. This presents a real opportunity for cyber security businesses that can help companies mitigate the risks and resolve incidents when they happen.
The Cyber UK conference in Belfast in April will shine a spotlight on the local industry as cyber security businesses from across the globe gather to discuss the future of the industry. Northern Ireland has a thriving tech sector with a growing number of start-ups and scale-ups primed with the knowledge and skills to take advantage of the increased demand.
BGF has backed a number of cyber security businesses in the UK and Ireland including Edgescan in Dublin and e2e-assure in Oxfordshire, and we continue to be on the lookout for further opportunities. With our investment, we’ve helped the companies to fund key hires, increase their sales forces and expand internationally, giving them the ability to scale and meet the growing need in the sector.
There are certain characteristics we look for in a cybersecurity business. The first is an effective, and preferably, proprietary product, which addresses a real-world problem. Whether it’s a SaaS business or a Security Operations Centre (SOC), the product and service must address the need in the market and provide reassurance to businesses. It doesn’t need to be ground-breaking, unique technology, but it does need to solve a pain-point. Strong fundamentals such as reliability and security of the software it deploys are also absolutely critical.
We also look for scalability. We already know that the cyber security industry is growing and evolving quickly and we’re ideally looking for businesses that can demonstrate an ability to outgrow the market as this demonstrates an effective business model and validates the product set appeal and efficacy. In addition, the majority of cyber businesses will have a blend of recurring and project-based revenues, but over time you want to see the former becoming dominant.
Great people are the key to any business and a cyber security business is no different. The team, its expertise and its reputation are all important factors when we are considering investments. We are acutely aware that attracting and retaining excellent staff, especially in a highly competitive market such as tech, can be a real challenge for businesses. It requires not only competitive rates of pay and benefits, but also a great culture which comes from the top. At BGF we see ourselves as junior, supportive partners, and therefore work closely with the teams we are backing to implement their plans.
Team is an area that BGF can support on and add value through the BGF Talent Network, one of the largest groups of board-level non-executives in the UK and Ireland. The Network allows us to suggest an appropriate person with relevant sector experience, to take a role at Board level that enables them to provide advice and strategic input as the company grows.
Cyber security is obviously a hot topic at the moment, and the demand shows no sign of slowing down as technology gets more sophisticated and the bad actors and criminals responsible for hacks and attacks learn new tricks. There is a real opportunity for businesses in this space in Northern Ireland to take advantage of the demand and carve out a niche for themselves in the sector.
