For the last 20 years, the popular RSA Conference has included an event aimed at spotlighting early-stage cybersecurity startups, giving them the chance to pitch their innovations to established vendors and – just as importantly – potential investors.
Now the operator of the conference is including a mandatory $5 million investment for those startups that make it into the top 10 of the annual Innovation Sandbox (ISB) competition.
Capital venture firm Crosspoint Capital Partners, which owns the RSA Conference, announced the investment this week, hoping to accelerate efforts by entrepreneurs and investors to develop technologies to address continuously evolving threats in the cybersecurity landscape. They also said “a portion of the investment returns will be used to support the RSA Conference community.”
“Cybercriminals are advancing every single day, and our industry needs a constant infusion of innovation to stay ahead of the bad actors,” Hugh Thompson, the conference’s executive chairman, told MSSP Alert. “Advancements in AI and other technologies have had a step function-impact on the complexity of threats. We believe the cybersecurity start-up community is essential in addressing these massive cybersecurity challenges.”
Supporting the Fight
The investment program for Innovation Sandbox startups “is supporting this crucial fight against cyberthreats through readily available, founder-friendly financing for the Innovation Sandbox Top 10 Finalists,” Thompson said.
About 150 startups apply to participate in the Innovation Sandbox every year, with more than 750 investors, cybersecurity professionals, entrepreneurs, and journalists watching the event. In the 20 years that the competition has run, those companies in the top 10 have together raised more than $16.4 billion in investment and have been involved in more than 90 M&A transactions. At the RSA Conference, the top 10 finalists that were selected by a panel of judges present an overview of their business and judges declare the winner.
“For many years, past ISB finalists have told us that the exposure they received from the ISB platform and RSA Conference has helped them attract more customers earlier in their journey,” Thompson said. “More market validation early in a startup’s life is exceptionally valuable.”
Making SAFE Investments
The $5 million investment will add to a startup’s momentum. The money will come in the form of an uncapped Simple Agreement for Future Equity (SAFE) investment from “affiliates of Crosspoint,” according to the firm. A SAFE investment is an immediate infusion of money that gives the investors of a startup rights to future equity in the company, but without requiring a maximum valuation limit on its valuation.
“This form of funding – an uncapped SAFE – provides a runway for these companies to focus on innovation,” he said. “Feedback from past ISB finalists and the venture community has been that this new investment program is a game-changer and makes the prospect of competing to become a Top 10 Finalist even more compelling.”
In addition, in recent years, early-stage investment rounds are much bigger, requiring multiple participants from the venture capitalist community, according to Thompson.
Some Good and Bad
Not everyone is sold on the $5 million investment. Rob Enderle, principal analyst with The Enderle Group, told MSSP Alert that “different companies have different potentials and different financial needs to be successful. Flat amounts can do significant damage by giving some companies insufficient funds and others more than they need, both leading to financial problems later on. I think the contest is a good idea, but that the awards should reflect what the companies' needs are so that they ensure success, not just involvement.”
There are advantages, Enderle said. It will make startups in the Innovation Sandbox event – particularly the winners – more visible, which could lead to deeper investments from other firms.
However, the analyst added that “this feels more like a marketing stunt to me, an expensive one, and less like something that is designed to truly make a difference. However, if it makes RSA more visible, it may be worth the expense of doing it. It’s just a shame it isn’t more focused on ensuring the success of the winners.”
