Cybersecurity’s Shifting Business Models
In a conversation focused on the cybersecurity industry, Boro identified a significant opportunity in acquiring venture-backed cybersecurity startups that were overvalued during the pandemic but possess strong technological foundations. “We’re seeing a massive opportunity in those companies that are overvalued but have great tech,” Boro explained. “It's just that there are broken business models.”
Consolidation Trends and Strategic Focus
Unlike the past, the cybersecurity industry no longer sees the emergence of large multiplatform companies through extensive acquisitions, as was common with giants like Symantec and McAfee. Boro noted, “Today, it’s more focused. It’s much more strategic and much more thoughtful. We’re staying in our lanes.”
Impact of Economic Factors on Cybersecurity Vendors
Boro emphasized that the industry has become increasingly challenging for cybersecurity vendors that aren’t leading their categories. The interest rate hikes that began two years ago have elongated sales cycles, complicating customer spending forecasts and adding steps to procurement processes. “It was much harder for people to forecast their spend. There were many more steps that got introduced into the process, and companies had to adapt to that,” said Boro.
The Dual Role of Generative AI in Cybersecurity
Generative AI introduces both complexities and solutions within the cybersecurity landscape. “Bad actors who are incredibly well-funded now have a new tool to use,” Boro mentioned, highlighting the increased threat landscape. Conversely, he noted that generative AI also enhances cybersecurity solutions in two primary ways: by making software more user-friendly through threat summarization and by improving the efficiency of threat detection for companies and their customers. “Everyone has a generative AI strategy today,” he added.
Strategic Acquisitions Amidst Market Challenges
As the cybersecurity sector evolves, Thoma Bravo sees strategic acquisitions as a key avenue for leveraging undervalued yet technologically robust companies. By focusing on companies with strong tech but struggling business models, Thoma Bravo aims to consolidate and strengthen its position in the cybersecurity market, navigating through elongated sales cycles and leveraging AI advancements to bolster cybersecurity defenses.
In conclusion, Thoma Bravo’s approach to navigating the cybersecurity sector underscores the importance of strategic focus and innovation in overcoming the challenges posed by evolving business models and the integration of generative AI. The firm’s acquisition strategy aims to capitalize on technological strengths while addressing the inherent business model weaknesses within the industry.
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