Published on: 22/02/2024
As a financial analyst, Ive been closely following the dynamic world of information security startups, delving into the depths of sectors such as blockchain, AI, machine learning, and cloud security. A study recently conducted by a Swiss team under the auspices of Cyber-Defence Campus grabbed my attention. Classified as an empirical analysis, this fascinating study elucidated blockchain as the highest performing sector among information security startup investments.
Yes, you read that right! Blockchain has managed to outshine notable sectors like AI, machine learning, and even the prolific private and cloud security segments. This is not just another notch in the belt, but a significant predicative marker for the future of this sector.
According to this elaborate study which measured performance via annual arithmetic (AAR) and log returns, the blockchain sector had the highest performance rate at a staggering 177.27% and 105.42%, respectively. Investments in blockchain security startups surpassed the returns of all other sectors by a broad margin, leaving AI trailing behind at second place with expected annualized arithmetic returns of 67.25%.
Its interesting to note that these rates merely represent the security sector of AI, excluding any hardware, non-security software, and other services from the equation. When focusing strictly on security-related investments, blockchain not only snags the first place in returns but also in speed. Blockchain startups transition from initial funding to IPO in under three and half years on average, much faster than the four to seven years taken by other sectors.
This electrifying piece of research draws information from Crunchbase data sources that spotlight funding rounds with exhaustive detail. However, the data lacks some entries for IPOs, an inadequacy covered by machine learning applications. The researchers suggest that the strong performance of blockchain security startups echoes investors’ enthusiasm for cryptocurrencies.
Lets put this data into perspective. The timeframe encapsulated in this research spans from 2010 to 2022, a period that unsurprisingly coincides with the rise of cryptocurrencies and blockchain tech but excludes the defining post-COVID era, a time internationally viewed as transformative for blockchain and crypto.
So, what does this all point towards? For investors, it signals a clear nudge towards the blockchain security sector – higher returns and speedier transitions are hard aspects to ignore. For other sectors, its a sign that blockchain technology isnt a fleeting trend - its here to stay and it continues to outperform even major sectors like AI and machine learning. Does this mean rushing all investments into the blockchain? Not at all. But it certainly highlights the need to understand and adapt to the rapidly evolving landscape of blockchain and its undeniable impact on the information security startup scene.
Invest in knowledge first, and then let the knowledge dictate the investments. As blockchain rides high on the wave of technological advancement, now is the time to study the tide and anticipate the next big wave.