Contributor: Andrew Elwell
Posted: 09/24/2012 12:00:00 AM EDT | 0
“There’s a lot of money going into cyber. Last year around $1 billion went in from the venture capital community, which doesn’t include any of the large scale M&A, and that’s a lot for a nascent sector. The investment community is getting it.”
Manish Thakur, as Managing Partner of New York-based private equity firm Hudson Fairfax Group (HFG), which invests growth capital in mid-market cyber and defence companies, is at the forefront of that investment community.
“We think investing in cyber is a speciality unto itself,” Thakur told me in an exclusive interview.
Cyber space is unlike many other sectors – in the future there will not be one company that has all the capabilities to do everything; there won’t be a ‘one stop shop.’ But, equally, there won’t be numerous companies all offering the same thing either. For this reason, Thakur says, there will be a great deal of diversity in the sector and as a consequence investment houses will need to specialise in certain areas of the cyber domain.
Big data, network security and analytics are some of the key growth areas according to HFG. “Big data as a whole is booming,” Thakur said.
“Traditional firewalls don’t work anymore, and the reality is if a bad actor wants to get into your network, they’re going to find a way in.
“The human race has never found a domain where we haven’t fought, be it the land, sea, air, and now in cyber space. Whether you like it or not there already is a battle going on.
“The next generation of network security is locating those intrusions as they happen and then taking remedial action quickly.”
Other areas the investment firm is keeping tabs on include the growth of mobile, remote access, and the cloud. All of these “have implications for the government and for industry,” which Thakur was keen to underline as a key consideration since the cyber threat is now a universal and all inclusive one.
“What I think is important to note is that the sense up until now has been that this [the threat from hackers and cyber terrorists] is a government affair but now we’re seeing a situation where it’s becoming a total affair.”
It’s for this reason that demand for cyber security technologies is continuing to rise and why HFG is positioning itself to be a prime investor and expert authority in the market.
In addition, tighter security measures will be mandated in the future, if they haven’t been already, by the government and other organisations in order to quell the digital threat. “Regulation is coming into play,” said Thakur. “I think we’ll find a situation where the SEC demands that banks and healthcare organisations have better controls.”
What about the defence sector in general though? With sequestration on the horizon, isn’t the industry a risky place for investors now?
While Hudson Fairfax Group does classify itself as a defence sector investor, “what we are really focusing on are next generation defence companies,” said Thakur. “Yes, the overall defence budget may be declining, but there’s a rebalancing going on and there are parts within it that are growing … like cyber.”
“There were a lot of companies formed post 9/11 and we’re seeing them come to maturation now, and so we’re seeing great opportunities.”
For Hudson Fairfax this is an exciting time as next generation technologies come to market. While some of the defence industry’s traditional land, sea and air platforms begin to suffer from the economic downturn, other areas of innovation, like cyber security, are benefitting from swelling demand.
“Cyber is one of the few real growth areas in America right now. The need for cyber is not going to go away because the kinds of threats we’re facing keep evolving,” Thakur said.
What do you think about investing in cyber? Are there any other areas of defence that can promise similar ROI? Are you investing in the sector or are you looking to raise fund? Get in touch on firstname.lastname@example.org