Cybersecurity Startups Founders Need to Focus on Market Needs
Zooming in on the European Cybersecurity Startup Scene: A Bias Towards Technology-First Approaches
Hello Cyber Builders 🖖,
This week's edition delves into a critical issue at the heart of Europe's cybersecurity innovation: the need for a more robust market focus among startups. The European cybersecurity landscape is teeming with technical ingenuity and entrepreneurial spirit, as evidenced by the burgeoning startup ecosystem. However, the real challenge lies in aligning these technological advancements with the nuanced needs of the market.
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Let’s dive into it!
The Evolution of Cybersecurity Startups in Europe
From Niche to Necessity
A decade ago, cybersecurity in Europe was often viewed as a point issue, addressing specific needs without recognizing a broader market or system. This perspective was reflected in the investment landscape, where cybersecurity was not considered a priority for many European venture capitalists.
Several companies have been created, focusing on “architectural building blocks” such as firewalls on a network or encryption software.
In the minds of many investors, it was a very technical, niche market, like selling a specific machine tool in the industry. Not very sexy, no 10x successes…
Fast Forward Today with The Wavestone Radar
Fast forward to the present, and the scenario has shifted dramatically, especially in France. The Wavestone radar, which explicitly tracks the French market, now lists 163 cybersecurity startups, signaling a robust and burgeoning ecosystem.
This growth is quantitative and qualitative, with a deeper understanding of the complexities and necessities of cybersecurity investments.
Moreover, the change in perception and the subsequent boom in cybersecurity startups can be attributed to a more fragile and uncertain political landscape across Europe, coupled with the rise of a sophisticated cybercrime economy.
These factors have made cybersecurity a crucial, wide-ranging, and indispensable field for investors who now recognize the depth and importance of these investments.
Compared to a decade ago, today's venture capitalists are eager to include cybersecurity ventures in their portfolios. This marked shift has led to a surge in funding for cybersecurity startups, fueled by the growing recognition of cyber threats and the critical need for innovative solutions. This influx brings with it the challenges typical of any booming market. The rush to invest in cybersecurity can lead to a crowded marketplace, where differentiation becomes difficult, and the quality of solutions can vary significantly…. Entrepreneurship is not an easy road.
The Gap Between Innovation and Market Needs in Cybersecurity
Too much Engineering Mindset - Too few Market Validation
The Wavestone radar reveals a significant trend among French - and European, by extension - cybersecurity startups: a strong focus on technical capabilities and engineering prowess. With their deep engineering backgrounds, entrepreneurs are adept at identifying and addressing technical challenges, often leading to innovative solutions to complex problems.
However, this technical focus sometimes disconnects from market needs and customer pains. Many startups are concentrating on what they know and can do rather than aligning their innovations with the evolving needs of users and businesses. This approach can result in products that, while technically advanced, may not fully address the most pressing issues customers face in the real world.
The Copycat Phenomenon
A common outcome of this engineering-centric approach is the proliferation of "copycat" solutions—new versions of existing technologies like encryption systems, password management tools, and authentication methods. These solutions may offer incremental improvements over their predecessors but often fail to break new ground or address emerging threats and challenges.
The “better, faster” value proposition in any vertical is challenging to sustain for a startup, but in cybersecurity, it is “awful.” Let’s imagine you develop another authentication system:
Founders: Look, I have this new multi-factor authentication system. It is 10% faster than Google or Microsoft and more secure as we use the latest cryptography algorithms. We, the founders, all have crypto phs
Me: OK…. who are your customers?
Founders: Everyone
Me: OK, but who are you selling to now?
Founders: Well, we just started, and as it is hard to sell to large accounts, we are selling our product to local small businesses. We started with the butcher.
Ok… I love butcher and respect 200% entrepreneurs, but guys, this is not how you create a successful company. You are tech-savvy; you must focus your technology know-how on real problems.
The Need for Market-Oriented Innovation
To truly advance the cybersecurity landscape, startups must adopt a more market-oriented approach. This involves:
Understanding where and how IT and digital products are used in various sectors.
Going out of the building - talking to potential customers
It is identifying the unique cybersecurity challenges and risks associated with these uses.
Going out of the building - talking to potential customers
Developing solutions that address these specific challenges rather than iterating on existing technologies.
Going out of the building - talking to potential customers
“Going out …”: Understanding the market needs takes many meetings, calls, and interviews. It feels safer to open VS Code (or any software engineering tool) and do a little coding session than try to book 5 more meetings for next week over LinkedIn.
This shift towards a market-oriented mindset requires a concerted effort from cybersecurity startups to engage directly with their potential customers, understand their unique environments, and tailor their innovations to meet these needs. It's not just about building a product with superior technical specifications; it's about solving real-world problems that customers face daily.
Engaging with potential customers should not be a one-off activity but a continuous process that shapes every aspect of a startup's product development cycle. By stepping out of their comfort zones and interacting with businesses across various sectors, cybersecurity entrepreneurs can gain invaluable insights into the practical challenges and pain points these organizations encounter.
For cybersecurity startups to thrive and make a lasting impact in an increasingly crowded market, they must embrace a market-oriented approach. This involves a commitment to understanding the real-world applications of IT and digital products, engaging with potential customers to uncover their cybersecurity challenges, and innovating to address them with tailored solutions. What a program!
Conclusion
As we navigate the complexities of the cybersecurity startup boom in Europe, it's clear that the path to success lies beyond mere technical excellence. The future of cybersecurity innovation will be defined by startups that not only master the engineering challenges but also deeply understand and respond to the market's evolving demands.
Thank you for joining me on Cyber Builders every week. Your insights and contributions are invaluable to this ongoing conversation.
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This post is public, so feel free to share it with fellow Cyber Builders and others. Together, we can shape a cybersecurity ecosystem that's both technologically advanced but also market-savvy and user-centric!
Laurent 💚