Cyber Valuations Climb as Capital Concentrates and AI Security Expands Globally

Cybersecurity Valuations Soar as Capital Concentrates in Large Private Rounds

The final quarter of 2025 saw a significant surge in venture funding for cybersecurity companies, with large private rounds driving valuations higher across all stages. According to data from DataTribe, total capital invested in the sector approached $150 billion for the year, with a disproportionate share flowing into fewer than 100 deals.

In the fourth quarter alone, fewer than 100 transactions represented over $34 billion in investment, with multiple financings surpassing the $1 billion mark. This trend of concentrated capital has led to companies extending their time to exit, keeping significant capital in late-stage private markets. However, IPO activity strengthened, with the US market recording 110 offerings and over $22 billion in proceeds in the third quarter of 2025.

Early-stage activity in the sector also improved, with seed and Series A deal activity increasing during the quarter.

Seed volume surpassed 1,000 deals for the first time since the third quarter of 2023, representing a 41% increase from post-pandemic lows in the fourth quarter of 2024. Cybersecurity outperformed the broader venture market at both seed and Series A stages, with median pre-money valuations at Series A reaching a record high across US venture.

Investors remained selective at Series A, with down rounds persisting at higher levels.

This reflects a funding environment in which companies that secure financing achieve valuation appreciation in line with pre-pandemic norms. Capital remained highly concentrated at the top end of the market, with services-oriented companies accounting for over 15% of deals during the quarter.

AI security continued to be a focal point, with many companies shifting emphasis toward governance capabilities as enterprises prepare for more autonomous systems.

Identity and access management represented over 15% of deals, reflecting expanding machine identities across enterprise environments. Data security accounted for roughly 10% of transactions, including multiple companies focused on fully homomorphic encryption and its potential applicability to AI systems.

A survey of 3,887 business and technology executives conducted between May and July 2025 found that 78% of respondents indicated their organizations plan to increase cybersecurity spending in 2026.

The survey, which spanned large and mid-sized enterprises across 72 countries, found broad alignment between startup formation and planned enterprise spending across categories.

Artificial intelligence ranked highest in both startup formation and planned enterprise spending, with two distinct segments emerging in seed activity.

One group focused on protecting AI models, agents, and AI-enabled systems as a new attack surface, while another centered on AI-driven automation and autonomous security operations, including SOC automation and continuous penetration testing.

Cloud security and network security and zero-trust ranked second and third among enterprise budget priorities for 2026, with a smaller share of seed-stage startups focused exclusively on those areas.

Startup activity in 2025 concentrated heavily on red teaming, penetration testing, and AI-enabled SOC automation, leaving room for additional innovation targeting cloud configuration challenges and network vulnerability management.

Cyber managed services and security awareness training also ranked high in enterprise spending plans, with venture-backed seed activity in those categories remaining limited.

Market conditions heading into 2026 are expected to reinforce trends seen throughout 2025, with valuations increasing, capital concentrating in large private rounds, and AI remaining central to investment strategy.