The Most Overvalued Cybersecurity Startups

Like other types of startups, cybersecurity software firms experienced a surge of investment and sky-high private valuations in recent years. Now that the party is beginning to peter out, security startups are bracing for a hangover.

As valuations have fallen with the stock market slide and venture capital crunch, an array of startups face challenges maintaining their most recent valuations. Either they can forgo fundraising, slashing costs to conserve capital, or they can accept a reduced share price in a new fundraising round. That would also cause pain for recent investors and employees.

We examined five well-known cybersecurity startups that raised money in the past year at valuations of between $2 billion and $8.5 billion but are likely to slash them in the coming months or years, depending on how long they can put off a new funding round. Using previously undisclosed revenue figures, we calculated the companies’ valuations as between 85 and 166 times their forward revenue. The valuation multiples far exceeded those of comparable public-market security stocks even before the recent stock market rout.