A new report today from cybersecurity recruitment firm Pinpoint Search Group has found that cybersecurity funding surged in the second quarter after the industry underwent considerable changes over the last year.

Pinpoint’s research team recorded 120 transactions in the cybersecurity market in the second quarter, totaling $3.3 billion across 98 funding rounds and 22 mergers and acquisitions. Although the number of transactions was only up one from the second quarter of 2023, funding was up 71% from $1.9 billion.

It’s noted that the second quarter of this year’s number was skewed by Wiz Inc. raising $1 million in May. Excluding Wiz, overall funding raised a more modest 21%, still a positive growth figure for the sector.

Early-stage rounds, including Seed and Series A rounds, accounted for 55% of funding in the second quarter. The report notes that the growing investor interest in budding companies is indicative of growing confidence in new vendors addressing current and future business challenges.

Not surprisingly, artificial intelligence is driving some of the increased interest in new cybersecurity startups, with Pinpoint noting that there is growing concern around AI-powered threats. Seed rounds accounted for 42% of all tracked rounds last year and continue to remain strong in 2024.

Later-stage deals, including growth funding and Series C and up deals, accounted for 13% of deals in the second quarter but 65% of the total funding during that period. Investors’ interest in late-stage rounds was driven by their increasing investments in established security vendors looking to expand their product lines and enter new markets.

“The upward trend in funding year over year is not easily explained,” Mark Sasson, founder and managing partner at Pinpoint Search Group, explains. “Last year was a challenging year economically, likely contributing to the dip in cybersecurity funding we experienced throughout 2023. Additionally, there has been growing evidence of an industry reset, with investors spreading their funding dollars among new technologies designed to address the IT threat landscape of tomorrow, including AI, crypto and automation.”

The positive numbers for cybersecurity funding come after a report from PitchBook on July 3 found that overall global venture capital funding in the second quarter remained sluggish. In the U.S., overall deal activity increased on a count basis in the quarter, but a lengthening exit slowdown is pressuring companies back into a market that is less forgiving than they are used to.

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