Talking cybersecurity, SaaS and early-stage valuations with ForgePoint Capital
Earlier today TechCrunch covered the launch of a new, $450 million cybersecurity-focused fund, the second from venture group ForgePoint Capital.
The new vehicle, inventively named Fund II, will mostly focus on early-stage companies in the cybersecurity space. The fund's timing is somewhat unsurprising. As we noted in our earlier coverage, the recent IPOs of Cloudflare (more here) and CrowdStrike (more here) have given cybsersecurity a halo, showing founders and investors alike that outsize returns are possible in the space. Such successes can't hurt VCs looking for fresh capital.
To get a stronger grip on how ForgePoint sees the market, TechCrunch corresponded with the group, asking about fund mechanics (check sizes, investing pace), the cybersecurity sector itself (business models, valuations) and recent liquidity events (CrowdStrike in particular). ForgePoint's Alberto Yi(C)pez, a co-founder and managing director at the group, answered our questions.
The following interview has been lightly edited for clarity and length. Let's have some fun:
TechCrunch: The new fund is $150 million larger than its predecessor. Why raise 50% more for the new vehicle? What is the target number of checks per year? Will it be faster than the preceding fund?
ForgePoint Capital: We were one of the first investors to focus on cybersecurity when we raised our first fund. Since then, the cybersecurity market has grown by more than 50%, driven by the constantly evolving challenges facing businesses, governments and individuals. We've also doubled our investment team. Our team has a singular focus on the market, driving unparalleled domain expertise and insights into emerging industry trends.
We will continue to invest in six to ten new cybersecurity companies per year, and find great opportunities with leading entrepreneurs.
Putting capital to work in "early-stage and select growth companies" is delightfully flexible. What check size range is the fund targeting, and what is the target deal size for growth-oriented deals?
We target up to $25 million for early-stage ventures throughout the life of an investment, and up to $50 million for growth-oriented companies achieving considerable revenue growth.
How much did Crowdstrike's successful IPO boost cybersecurity-focused startup valuations and fundraising last year?
A rising tide lifts all boats. In cybersecurity, as elsewhere, the market rewards rapid growth and valuations reflect [that]. We target companies with great teams building innovative solutions that are poised for high growth. While the Crowdstrike IPO certainly boosted attention on the market, over 90% of successful cybersecurity exits are through M&A. Strategic buyers and financial sponsors pay up for companies that can scale.