Evolution Equity Partners raises $1.1 billion for new cybersecurity and AI fund

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Cybersecurity has been struggling recently, with investment in the sector plummeting 40% year over year. But there are early, if tentative, signs of recovery.

According to cybersecurity-focused VC firm Night Dragon, the majority of chief information security officers reported their budgets will increase in 2024. Also, according to recruitment firm Pinpoint, the number of deals increased in the first quarter of 2024 compared to his first quarter of 2023, even though overall investment in the cybersecurity industry decreased.

Against this backdrop, New York-based growth capital investment firm Evolution Equity Partners on Tuesday launched a $1.1 billion cybersecurity and AI fund, the third in Evolution's history.

The fund, called Evolution Technology Fund III, was flooded with applications, with participation from existing and new funds, government investors, insurance companies, foundations, funds of funds, family offices, angels and more. Richard Seewald, managing partner and co-founder of Evolution, told TechCrunch that the company is working with cybersecurity companies and startups that leverage machine learning and AI to build “market-leading” platforms. He said he plans to pursue investments in the range of $20 million to $150 million.

“Evolution Technology Fund III has already backed 15 leading cybersecurity companies and began its investment period over 12 months ago,” Seewald said. “We plan to invest in a portfolio of up to 30 companies with our current fund. We work with management teams and founders to invest in areas such as sales and marketing, product technology, human capital, M&A, and business development. We provide support and insight to enable them to truly excel.”

Evolution's strategy with Evolution Technology Fund III is to allocate approximately 75% of the total $1.1 billion to early growth stage companies, approximately 15% to late growth stage startups, and approximately 10% to early stage VC tranches. It will be secured. Investments will be made not only in North America, but also in Europe and security technology hotspot Israel.

“Our strategy is to invest that money in a diversified portfolio across different stages of maturity,” Seewald said. “We believe this will enable private market investors to diversify cybersecurity opportunities.”

ESG is another factor, Seewald said.

“Evolution is committed to integrating important environmental, social and governance (ESG) standards into our investment processes and ownership practices,” he said. “We actively engage with our portfolio companies to create diverse boards and leadership teams, bring diverse perspectives to the decision-making process, reduce the risk of groupthink, and strengthen accountability.”

We're going to keep them.

Evolution, which has offices in New York as well as Palo Alto, London and Zurich, was founded in 2008 by Seewald and Dennis Smith, who met while working together at cybersecurity giant AVG (now part of Avast). J.R. Smith and his former AVG CEO and chief scientist, Karel Obryk, joined Seewald and Smith to launch Evolution after AVG went public.

Evolution's team of 30 manages approximately $2 billion in assets and has supported 60 companies. The previous fund was $400 million. Some of the company's more successful bets include Arctic Wolf (planning an IPO), Talon Cyber ​​Security (reportedly in talks with Palo Alto Networks for an M&A deal), Snyk, Examples include Aqua Security, SecurityScorecard, and Carbon Black.