Why the Demand for Cybersecurity Innovation Is Surging

Source" Brian Jackson via Alamy Stock Photo

Companies have never faced a wider and more dynamic array of cyber threats than they do right now. From rapidly rising costs associated with data breaches and other cyberattacks to the exploitation of artificial intelligence (AI) to make attacks more effective than ever, the cyber-threat landscape is constantly evolving. This has led to a drastic increase in cybersecurity spending, as well as a wave of innovation in the sector.

As cyberattacks become more targeted and sophisticated, there is a vast and growing market for solutions that help companies address their most vulnerable attack vectors. For example, cybercriminals often steal account names, passwords, and other credentials to launch attacks, which is why identity and access management have become key priorities for companies across many industries. Cybercriminals are also using AI resources such as LLMs to target employees with advanced social engineering attacks that allow them to infiltrate secure networks and steal information.

Cybercriminals and other bad actors such as hostile foreign governments are more motivated than ever to develop powerful cyber capabilities that enable them to hijack data, disrupt operations, and bypass existing cybersecurity protocols. This trend will only gain momentum, and revolutionary technology like AI will function as a force multiplier that makes cyberattacks more destructive and difficult to detect. This is why the cybersecurity industry will continue to see unprecedented demand and investment in the coming years.

A New Era of Cyberattacks

Companies are investing heavily in cybersecurity — according to a PwC survey, 77% of companies plan to increase their cyber budgets, while Gartner has projected that information security spending will spike by 15% in 2025. However, these investments haven’t yet turned the tide against the onslaught of cyberattacks that are inflicting increasingly severe financial, reputational, and operational costs on companies. A 2024 IBM report found that the average cost of a data breach hit $4.88 million globally this year, a record high and a 10% increase from 2023.

The 2024 Allianz Risk Barometer found that cyber incidents are the top global business risk for the “first time and by a clear margin” — a finding that applies to companies of all sizes. AI is a key driver of this trend, as it has lowered the barriers to entry for cybercriminals around the world. For example, large language models (LLMs) allow cybercriminals to launch advanced phishing attacks regardless of their language skills or technical ability. Hostile foreign governments are using AI to launch cyberattacks as well — Microsoft reported that Russia, North Korea, and China are all using AI for surveillance, scripting, and social engineering.

As cyber threats become more dangerous and dynamic, the market for robust solutions will continue to expand. Companies in the sector will have to leverage emerging technology like AI and develop cybersecurity solutions that address specific vulnerabilities more effectively than their competitors.

Opportunities in the Cybersecurity Market

The cybersecurity industry has seen significant fragmentation in recent years as the demand for specialized solutions increases. Particular categories of cyberattacks, such as phishing, call for targeted solutions capable of countering the latest cybercriminal tactics. IBM reported that phishing is one of the most common and financially destructive initial attack vectors, which means cybercriminals are using it to gain access and launch broader cyberattacks. A major goal of phishing attacks is credential theft, which is why stolen or compromised credentials are involved in initial attacks more often than any other individual factor.

Companies like Strata help customers resist phishing attacks and other forms of credential theft with holistic identity and access management solutions. The reliance on legacy systems is one of the most urgent cybersecurity challenges many companies face — a challenge that has become all the more daunting due to the growing risk posed by third-party vendors and other partners. Supply chain cyberattacks are becoming increasingly common — Verizon found that there was a 68% increase in “supply chain interconnection” involved in breaches between 2023 and 2024.

Integrated cybersecurity solutions are critical, as cybercriminals and other bad actors need only a single access point to infiltrate an organization. Solutions that help customers modernize their cybersecurity infrastructure for the evolving cyber-threat landscape are becoming more vital. Chief information security officers (CISOs) and other cybersecurity leaders need access to simplified solutions that break down silos between IT and security teams, meet increasingly stringent compliance demands, and help them evaluate and address vulnerabilities.

Maximizing the Impact of Emerging Technology

While AI is propelling a new wave of cyberattacks, it can also be harnessed to keep companies safer. Companies can use AI to simulate cyberattacks, detect malicious activity, prioritize cyber threats and potential vulnerabilities, and protect data across many different environments. However, AI still faces significant trust issues, due to problems like hallucinations (when LLMs present false information as accurate) and the existence of “black box” machine learning algorithms that don’t provide any transparency into their decision-making processes.

According to a recent survey of 6,000 knowledge workers, 54% of AI users don’t trust the data used to train AI systems — and more than two-thirds of these workers say they’re hesitant to adopt AI. Meanwhile, laws and regulations around AI are becoming stricter all the time. For example, the EU AI Act requires companies to mitigate systemic risks, report cyber incidents, and focus on cybersecurity in their AI implementations.

While the AI trust gap is hindering adoption of the technology and regulations are becoming tougher, this opens a market for companies that provide end-to-end AI governance. At a time when AI adoption is skyrocketing, companies need the infrastructure necessary to ensure compliance and monitor AI systems for potential cyber threats. IBM found that 82% of executives believe “secure and trustworthy AI is essential to the success of their business,” but less than a quarter of generative AI projects are being secured.

From the need to safely implement technology like AI to the vast proliferation of cyber threats (many of which are being powered by that very same technology), the cybersecurity industry has reached an inflection point. The companies that recognize these market opportunities have remarkable growth prospects in the coming years.

About the Author

General Partner, Titanium Ventures

Marcus Bartram is General Partner at Titanium Ventures (former Telstra Ventures), a San Francisco-based VC firm that differentiates by generating revenue for its portfolio with strategic channel partners and customer relationships as well as by using data science to drive its investment process. Marcus is on the founding team and has led investments in cybersecurity companies like CrowdStrike, Auth0, Anomali, Cequence, CloudKnox, Cofense, CyberGRX, Elastica, vArmour, and Zimperium.