Research report by KPN Ventures on investments in cyber security. In cooperation with data partners Dealroom.co and Deloitte.

1. European Security Investment Landscape
a KPN Ventures Research Series Report – January 2019
Frederique van Tuyll– Junior Analyst

2. Global investments in security companies have reached record levels
Investment amounts have been rising, although the number of rounds has dropped
Source: Dealroom.co (category: security)
Numberofrounds
-
1.000
2.000
3.000
4.000
5.000
6.000
2012 2013 2014 2015 2016 2017 2018
-
100
200
300
400
500
600
700
800
€Millions
Investment amount (in €millions) Nr. of rounds
2

3. Source: Dealroom.co.
Investment amounts excludes deals with undisclosed amounts
Definition of stages: Seed: €0-1M, Venture: €1-5M, Growth: €5-25M, Later: > €25M
Investments in European security companies seem to have peaked
Numberofrounds
Investment rounds and amounts have decreased in 2018
€ 0
€ 100
€ 200
€ 300
€ 400
€ 500
€ 600
€ 700
€ 800
€ 900
2012 2013 2014 2015 2016 2017 2018
Millions
Investment amounts per stage (EU)*
Seed Venture Growth Later
3
63
80
122
201
236
221
186
-
50
100
150
200
250
2012 2013 2014 2015 2016 2017 2018
Number of investments per stage (EU)
Seed Venture Growth Later Total

4. Investments in European security companies - per investor type
Corporate VC participation is limited, but deal amounts are higher than average
Source: Dealroom.co
Other includes: accelerators, advisors, angels, angels funds, crowdfunding and users.
0% 20% 40% 60% 80% 100%
2012
2013
2014
2015
2016
2017
2018
Disclosed amounts in € millions
Investment fund Corporate Total other
0% 20% 40% 60% 80% 100%
2012
2013
2014
2015
2016
2017
2018
Deal count
Investment fund Corporate Total other
4

5. Companies in the European Digital Security (sum = 1,903)*
Quid reads company
descriptions to identify
key words and phrases,
comparing the
descriptions to create
links between companies
based on similar language
Each color represents a
different cluster. Quid
clusters companies using
a Natural Language
Processing (“NLP”)
algorithm
9
10
11
12
13
14
15
16
●
Threat detection &
malware protection
12%
●
Security consultancy
services
11%
●
Security &
vulnerability
assessment
10%
●
Digital identity &
access control
8%
● AI / Machine learning 6%
●
Managed cloud
services
5%
● IoT security 5%
● Mobile apps 5%
● Payments / PCI 5%
●
Network security &
UTM
5%
●
Security devices /
products
5%
●
Cyber threat
intelligence & incident
response
4%
● Blockchain 4%
●
Embedded systems
security
4%
●
Physical security
systems
4%
●
Encryption & file-
sharing
3%
● Disaster recovery 3%
● Forensics 2%
2
3
4
5
6
7
8
1
9
11
12
13
14
15
16
17
10
18
2
3
4
5
6
7
8
1
9
11
12
13
14
15
16 17
10
18
Clustering the European cyber security market
1,903 ventures in 18 clusters make up the European Digital Security ecosystem. Threat detection &
malware protection constitutes the largest with 12% of all companies
* Note: One node equals one company. Cluster percentage refers to the # of companies in a cluster as a percentage of the total number of companies in the ecosystem
Sources: Quid, CapitalIQ, Crunchbase, Deloitte analysis; Data per 20-12-2018
5

6. 2009
849 companies
2012
1,050 companies
2015
1,342 companies
2018
1,550 companies*
Clusters are sparsely connected. Threat
detection & malware protection and
Network security & UTM clusters have
already developed in the ecosystem
Ecosystem grows by 24%, Threat detection &
malware protection anchors in the core of the
network, enabling broader connections
throughout the ecosystem
Encryption & File-sharing cluster shows
significant growth. IoT security and Cyber
threat intelligence & incident response
clusters emerge along the periphery
Ecosystem continues to grow and becomes more
densely connected. AI / Machine learning and
Blockchain clusters appear in the ecosystem
*Note: Due to missing founding year data on 355 companies, the number of nodes in the state of the ecosystem (former slide) has reduced from 1,903 to 1,550 companies in the 2018 overview (right picture). This
has no significant effect on cluster distribution
Sources: Quid, CapitalIQ, Crunchbase, Deloitte analysis; Data per 20-12-2018
●
Threat detection &
malware protection
●
Security consultancy
services
●
Security & vulnerability
assessments
●
Digital identity & access
control
● AI / Machine learning
● Managed cloud services
● IoT security
● Mobile apps
● Payments / PCI
● Network security & UTM
●
Security devices /
products
●
Cyber threat intelligence
& incident response
● Blockchain
●
Embedded systems
security
●
Physical security
systems (fire/camera)
●
Encryption & file-
sharing
● Disaster recovery
● Forensics
Cluster evolvement of the European cyber security market
The digital security ecosystem has grown consistently over the past 10 years with a CAGR of 6%, AI
and Blockchain companies have appeared recently
6

7. Source: Dealroom.co
The UK tops the list with 54 deals.
Spain (17), Sweden (17), Germany (14) and France (14) follow
Key security deals of the largest hubs are shown on the map
Munich
Paris
London
Stockholm
Heatmap of the European cyber security investments in 2018
40+
10+
5+
2+
≤1
Numberofdeals
Berlin
7

8. European accelerators focused on cyber security
England
France
The Netherlands Estonia
Spain
Belgium
The UK accommodates most cyber security accelerators
Source: KPN Ventures analysis
5+
3+
2+
1+
0
Numberofaccelerators
8

9. Source: Dealroom.co
Largest investments in European cyber security companies
2018 AI / machine learning
Threat detection and malware protection
Encryption and filesharing
Threat detection and malware protection
Digital identity and access control
2017 Digital identity and access control
AI / machine learning
Digital identity and access control
AI / machine learning
AI / machine learning
2016
Security devices / products
AI / machine learning
Digital identity and access control
Network security and UTM
Encryption & file-sharing
2015 Network security and UTM
Cyber threat intelligence & incident response
Digital identity and access control
AI / machine learning
AI / machine learning
€ 100 M€ 50 M€ 0 M
9

10. Most active European cyber security investors in 2018
Rank Country Segments includeInvestors # Deals
(Europe/global)
2.
3.
1.
Investment examples
8/13
4/4
3/4
5/5
4.
Threat detection and malware protection
AI / Machine learning
Security consultancy services
Digital identity and access control
AI / Machine learning
Threat detection and malware protection
Threat detection and malware protection
Security & Vulnerability assessment
Source: Dealroom.co 10

11. Largest (disclosed) cyber security exits* in Europe in 2016 – 2018
*Only companies with an age younger than 10 years are considered, **for 22% of the deals the amount data is disclosed.
Source: Dealroom.co
Network security & UTM 2018 Acquisition 99
Security & vulnerability assessment 2018 Acquisition 21
Network security & UTM 2017 Acquisition 9
82018
Company DescriptionCountry Year Exit type Amount** (€M)
AcquisitionSecurity consultancy services
11
Acquirer
Digital identity & access control 2017 IPO 5N/A

12. Most active acquirers of European digital security companies
Timeframe: 2016 - 2018
Source: Crunchbase data (including segments security, cyber security, network security and cloud security)
2.
3.
Security consultancy services
Security consultancy services
Digital identity & access control
Other acquirers
1.
Security consultancy services
Security devices / products
Security consultancy services
Security consultancy services
Security consultancy services
Managed cloud services
Embedded systems security
Security devices / products
2018
2018
2018
2016
2016
2016
2016
2017
2018
2018
2017
Bevaknings AB Prevendo
Security consultancy services 2017
12

13. KPN Ventures is the venture capital investment arm of KPN,
The Netherlands’ leading telecom & ICT service provider.
We aim to create valuable partnerships with innovative European technology
companies providing access to capital, industry expertise, professional network
and customer channels.
KPN Ventures focusses on early growth-stage investments, series A/B. Our
investments typically range from 0.5 to 2.5 million euro for minority stakes,
building long-term partnerships, ultimately aiming for external exits, not
acquisitions.
Investments include: Jasper Wireless (exited to Cisco), Security Matters (exited
to ForeScout), Actility, EclecticIQ, CardioSecur, Sensara, Viloc, Nello, Sentiance,
ZecOps, CUJO.ai, Cybersprint, Cloudify
About KPN Ventures
Contact
Phone: +31 10 45 78 82 3
E-mail: kpnventures@kpn.com
Website: www.kpnventures.com
with support from data partners:
Amsterdam office
Teleportboulevard 121
1043AJ Amsterdam
The Netherlands
Rotterdam office
Wilhelminakade 123
3072AP Rotterdam
The Netherlands
13