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First coined by Lebanese-American thought leader Nassim Nicholas Taleb, the term “black swan” refers to an unforeseen global event that has a profound impact on society. Some are beneficial, like the invention of the printing press. Some, like the 2008 subprime crisis, are devastating. But they all changed the course of history.
In recent years we have witnessed a surge in black swan events and they continue to appear in real time. They affect every aspect of our lives and this is also true in the world of cybersecurity. By analyzing these recent events, we can more accurately map the evolutionary process of the industry and predict where cybersecurity is headed next.
The COVID-19 pandemic set the stage for innovation
There is no doubt that one of the most important black swans in recent memory is the beginning of the 2020 COVID-19 pandemic. One of the direct consequences of this global crisis has been the shift to working from home. Overwhelming incentives to move the majority of digital activity from physical data centers to virtual cloud workspaces.
This was a matter of decentralization versus centralization. Before the pandemic, it was considered standard practice to centralize an organization’s digital assets in one physical location that could be protected by a traditional security perimeter. However, during the pandemic, it became a liability and organizations rapidly decentralized, moving assets such as business-critical applications and databases to the cloud. However, this adjustment changed the attack vector for hackers and required an entirely different defense.
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Decentralization of digital assets introduces new security vulnerabilities both at work and in employees’ homes, creating major hurdles to protection against increasingly sophisticated and well-funded cybercriminals it was done. These hackers have developed new techniques known as Gen V attacks. It was multi-dimensional and allowed attackers to attack from different angles simultaneously.
As these new cyber threats emerged, the newly developed cloud environment also demanded security products that were easier and faster to install, activate, and maintain. All these factors combine to create the perfect conditions for a new approach to cybersecurity that calls for record-breaking funding.
The rise and fall of cyber security capital investment
The next black bird in cybersecurity came shortly after the pandemic effectively ended (also known as the COVID cyber boom). The combination of the need to protect decentralized digital assets from Gen V attacks and the need to develop new products for today’s modern environment is driven by a macroeconomic environment with low interest rates and high liquidity. It was a strong incentive for fostered innovation. In 2021, it should come as no surprise that more than $20 billion in venture capital has been invested in cybersecurity companies around the world. This is a new record. Venture capital firms were eager to enter this expanding industry.
As a result of this free flow of funds, cybersecurity startups have experienced meteoric market valuations that have led to the emergence of many unicorns. While these ratings certainly represented their potential, they often inaccurately represented the true value of the companies. are emerging one after another, offering an unprecedented level of versatility. But the market was flooded with companies with inaccurate valuations, creating a bubble. And unfortunately we know how the bubble ends.
The final Black Swan actually involved three events in 2022. Rising interest rates, global supply chain crises, war in Ukraine. This was the perfect storm for the global recession. Capital and market valuations that seemed very high just a year ago appear to have fallen off a cliff, resulting in a significant slowdown in easily sustained growth in 2021.
where does this leave us?
We are in an awkward situation today. As investments in innovation dwindle, assets continue to be decentralized, the Gen V attack surface still exists, and organizations need end-to-end solutions.
As such, we expect the industry to experience extreme consolidation over the next 18 months, strengthening the line of defense for cybersecurity products and offering comprehensive solutions. This means integrating similar products under one roof to create an end-to-end solution that allows the CISO to offer a layered protection model. This is accomplished through mergers, acquisitions, or partnerships rather than relying on forming new companies.
The challenge here is one of execution, and the importance of this kind of integration for large organizations looms large. There are real and justifiable concerns about this kind of integration. What if big, well-funded organizations absorb startups, rob them of their agency and agility, and essentially crush them before they trample their ability to innovate? Effectively crushing the differentiator on top is lost.
To prevent this, organizations should be careful to give acquired startups a high degree of autonomy without adding bureaucracy or friction. Only by guaranteeing these freedoms can large organizations leverage the ability of startups to develop, test and deploy solutions with a high degree of precision and speed. This will likely require a strategic restructuring of the organization, with individuals who understand how to balance the needs of a startup with the wealth, size and goals of a large organization. Able to act as a trusted intermediary between teams. This is how large organizations reinvent themselves to meet the opportunities presented by a series of black swans.
On the startup side, these entrepreneurs need to make sure their new parent organization is aligned with their vision for growth. You need to create a roadmap for the next two to three fiscal years and set expectations on both sides. By uniting all parties towards a common goal, cybersecurity organizations can deliver a modern, end-to-end solution to decentralization without making the industry dependent on venture capital that no longer exists.
Black Swan is making a positive difference in cybersecurity
Digital decentralization in 2020, industry growth in 2021, and inevitable bankruptcy in 2022 was a vortex of events in just three years. But their challenges and opportunities propel us toward a safer cyber world. After a series of black swans that irreversibly changed the course of our industry, the technological and economic evolution of cybersecurity is heading in a positive direction towards a brighter future.
Moshe Lipsker is Senior Vice President of Product Development at Imperva..
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