Investment Promise for ICS Security Startups

Nov. 22, 2016, 10:44 a.m.
Michela Menting, Research Director

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The promise of investment for securing industrial control systems (ICS) has remained relatively unfulfilled in the past few years since the first shockwaves resulting from the discovery of Stuxnet in 2009. Industrial operators have been slow to implement comprehensive cybersecurity mechanisms within their facilities. Cost factors, legacy equipment, skills shortage, and low risk awareness all contribute to the poor state of affairs in ICS security, despite best intentions.

The resultant market offerings have therefore been few and less dynamic than the broader cybersecurity industry, although defense contractors and industrial OEMs have made some significant efforts to address the gap in the market and their own vulnerabilities.  It is the startup scene which has been more or less scant, with some of the few startups having been quickly snapped up by larger players - Industrial Defender (Lockheed Martin), Wurldtech (GE), and Tofino (Belden) - and others entrenching themselves into the market (Waterfall, NextNine, Security Matters).

However, with greater visibility of IoT  vulnerabilities in current media and research, the niche ICS security market is expanding faster now, with emerging players in the space picking up the slack. The last 12 months has seen a spurt of growth in the startup scene, with quite a few receiving funding in the millions:

  • NexDefense (caters to automation & control system operators in critical infrastructure with real-time knowledge on threats): $5.6M Series A
  • Veracity (network security for the industrial internet): $3M Venture Round
  • CyberX (cybersecurity technology for industrial networks): $9M Series A
  • Dragos Security (cyber situational awareness into critical infrastructure networks): $1.2M Seed Round
  • Darktrace ICS (a real-time ‘immune system’ for operational technologies): $64M Series C
  • Nozomi Networks (cybersecurity and operational visibility for industrial control systems): $7.5M Series A
  • Indegy (visibility and security for industrial control networks): $12M Series A
  • Claroty (cybersecurity for operational technology networks): $32M Venture Round

Both Darktrace and Claroty’s rounds are significant, not least for the latter because it only emerged from stealth in September 2016. The startup was launched by the Israeli cybersecurity accelerator Team8. Indegy as well has come from the dynamic Israeli cybersecurity scene, which has remained world-leading in the space. Another local startup to keep an eye out for is Aperio Systems, which recently emerged from stealth this month. Aperio provides a data forgery protection system to ensure more resilient industrial control systems.

Securing industrial control systems is no easy task as it requires applying traditional cybersecurity mechanisms to a new operational context. However, there is startup talent keen to address this problem, and with the increased visibility of IoT-related threats, the ICS security market is set to expand considerably over the next few years.