A Rising Tide for Cybersecurity Regulation & Entrepreneurs

july tidesReacting to the shockwaves that recent data breaches sent through government, businesses and individuals, the United States Congress has held a large number of committee hearings on cybersecurity and privacy. These regulatory deliberations and expected regulatory changes, combined with the major losses inflicted on large companies and institutions, are driving entrepreneurs and investors to help meet the demand for data protection.

As the Securities and Exchange Commission (SEC) emphasizes the importance of including cybersecurity processes and events in a public company’s disclosure of risk factors and material events, young companies are busy bringing to market products and services to improve an organizations’ cyber infrastructure, make encryption easier in file-sharing, help companies detect vulnerable machines on their networks and keep hackers out.

Further, a recent story published in the Wall Street Journal highlighted the rise in investor interest in cybersecurity innovations. The attention of policymakers and top corporate leaders to this issue has made the cybersecurity startup sector now much more likely to see profits. Google Capital, Allegis Capital, Menlo Ventures, and Andreessen Horowitz have all increased their cybersecurity portfolios. That wasn’t the case in the past.

Demand for cybersecurity startup talent

Coding skills are now widely known to open many career doors, with many, even seniors, rushing to learn the language of the digital world. Cryptography, however, remains the skill of a much smaller, and until now less lucrative, niche sector of the workforce.

Investors stress the encryption sector is different from social platforms and the sharing economy where the problems are more immediate and at an individual-level -- like booking a room or finding a taxi ride. Those two, commercially less risky sectors have attracted the great majority of digital startup talent to date.

As a result, a relatively few sharing economy startup teams have a member with enough experience in the cybersecurity sector. This is beginning to change, responding to market needs. Programmers with a hacking background are now getting their feet wet in the world of startup pitches, mentorship and the high-risk venture world in general.

Government and entrepreneurs moving in the same direction

Calls for government-enforced accountability measures have helped drive the rise of the cybersecurity startup sector. Demands for regulatory reforms over cybersecurity requirements are pressing authorities across the world to consider new regulatory tools. In the Asia Pacific region, for example, governments are exploring stricter laws to require companies to take measures to ensure cybersecurity planning and protection.

Is it a fad? Hardly.

Regardless of the pace of policy action, the cybersecurity industry will likely remain dynamic, with competition among startup entrepreneurs and in-house corporate innovators vying to shield their security technology from the one data breach that could make their solution completely obsolete.

Demand for cybersecurity products and services will continue on the rise. Security threats will grow as internet devices, which are transmission points for enormous amounts of business and personal data, grow in use from 1.2 billion in 2014 to an estimated 26 billion devices by 2020. As Forbes pointed out, even seemingly non-sensitive data collecting devices put entire cyber infrastructures at risk. “Target’s 2013 breach, for example, occurred because hackers infiltrated an air handling system controller, using it as an entry point for the retailer’s point-of-sale system.”

According to the PriceWaterhouseCoopers annual survey of banking and capital market chief executives, 79 percent of CEOs across 54 countries rank cyber risk as the top threat to business growth. Over 90 percent expressed that cybersecurity technologies are strategically important for their organizations.

Cybersecurity has gained a permanent place on the agendas of investment firms and corporations. Public pressure has now positioned it as one of the most urgent policy issues before Congress and the Administration. PDE will follow this as heated discussion resumes after the August Congressional recess.

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