Early-stage startup support key to cementing global cyber leadership, following Darktrace’s IPO

Darktrace’s recent float on the London Stock Exchange was a significant moment for the UK’s tech sector. It demonstrates that a cyber security company can be founded in the UK and use this country as a base to scale, expand into international markets and go public. As the country’s cyber startups watched the value of Darktrace’s shares soar on its first day of trading (in contrast to Deliveroo’s more floppy start), the message was clear: they should be ambitious about their growth, and they don’t need to leave the UK to achieve starry levels of success. Everyone working in the sector must now double down on the support they give startups – in particular early-stage startups – so we have a strong pipeline of innovation.

The UK’s cyber sector looks very different now than it did when Darktrace was founded in 2013. An entire ecosystem has sprung up that includes spinouts from academic centres of excellence, and innovation programmes that accelerate the growth of high-potential startups and scaleups such as Privitar and Panaseer. These companies aren’t just concentrated in the capital – they’re also found in hubs across the country such as Cheltenham, Manchester and Edinburgh.

And the evidence shows that they are winning the confidence of the investor community. The Department for Digital, Culture, Media & Sport’s latest sectoral analysis revealed that 2020 was another record year for investment into the cyber sector. Plexal’s research has also shown that cyber is proving to be more resilient to big shocks that the rest of the tech sector. Our Startup Tracker found that investment into cyber grew during lockdown, while the tech sector saw investment fall over the same period. But while there is a lot more support for cyber startups now, there’s more competition too.

2020 saw a 21% increase in the number of cyber firms in the sector. When we speak to investors, they tell us they find it hard to differentiate between products that look very similar at face value. Meanwhile, security teams with buying power have complex technology stacks and any new solution has to be able to integrate into that architecture.

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It’s also extremely difficult to prove what makes a new cyber technology innovative, and explain how it works and build trust in it – even more so if it solves a problem the buyer hasn’t even recognised yet. We want innovators to be thinking 20 steps ahead, but while they are developing technology for tomorrow’s challenges, they run the risk of running out of cash. Darktrace has spent a large chunk of its funds on marketing and it’s easy to see why: success in cyber is in large part about building trust and communicating what you do well. Darktrace uses analogies to explain its tech and has managed to build a strong brand – something that’s not common in the sector. So many early-stage startups are focused on iterating their tech, but struggle to explain what challenge they solve.

Left untreated, these teething problems could derail the momentum the sector has built up over the last few years. It’s crucial that every corner of the ecosystem gets behind our cyber startups.

Successful companies like Darktrace can mentor early-stage counterparts and share their insights. Investors can look beyond their existing networks and leverage vendor-neutral third parties to back innovators. And industry can partner with startups to co-create solutions, run pilots, mentor founders or bring their challenges to the innovation community.

What the most mature startup hubs in the world like Silicon Valley get right is they use the first wave of success to create a ripple effect that’s repeatable. Investors and buyers become bolder, and startups benefit from the experience of founders who have put a flag in the ground. Darktrace’s IPO presents an opportunity for the cyber sector to support and spur on our startups. So let’s toast Darktrace, but keep our eyes firmly on the innovators who could be next.

Written by Saj Huq, director at LORCA – the DCMS-backed cyber security innovation programme

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