More cybersecurity firm closures expected after IronNet shutters
SC Media – Simon Hendery
The recent bankruptcy of IronNet, a network detection and response (NDR) company, is seen as a sign of the challenges faced by the cybersecurity industry in the current economy.
IronNet, founded by former NSA and U.S.
Cyber Command chief Keith Alexander, went public in 2021 with a valuation of $1.2 billion but struggled over the next 2 1/2 years.
Issues included lawsuits from shareholders, debt accumulation, difficulty finalizing deals, and lack of payment from clients, leading to layoffs.
Cybersecurity insiders believe that IronNet’s bankruptcy is not an isolated incident and expect more NDR and security companies to face similar challenges, resulting in layoffs and potential mergers or acquisitions.
This comes as the industry grapples with lower growth rates in CISO budgets, making it difficult for highly leveraged companies to meet expectations, especially in the current economic environment.
The collapse of IronNet highlights the importance of focusing on profitability, innovation, and running fiscally sound operations in the cybersecurity industry.
Businesses need to differentiate themselves, ensure product-market fit, and consolidate vendors to be more cost-effective and efficient.
Market consolidation is expected as undifferentiated companies are rationalized, leading to a healthier but smaller market.
The bankruptcy of IronNet also raises concerns about the role of special purpose acquisition companies (SPACs) in the IPO process.
Some insiders see the failure of IronNet as a drawback for SPACs, which were popular in recent years but fell out of favor as investment capital dried up.
The long-term reaction of regulators to SPAC failures remains to be seen.
In addition to bankruptcies, the cybersecurity industry is experiencing consolidation through mergers and acquisitions.
The number of M&A transactions has increased, but the value of the deals has decreased due to leaner times.
Overall, the IronNet bankruptcy emphasizes the importance of focusing on sound fundamentals and responsible growth strategies in the cybersecurity industry, even in times of easy investment.
The oversaturation of private equity has created a competitive landscape, leading to increased M&A consolidation, which is expected to continue.
Link: https://www.scmagazine.com/news/more-cybersecurity-firm-closures-expected-after-ironnet-shutters