Fortune: Lucy Brewster

Entrepreneur Jon Miller’s first foray into what would become his career in cybersecurity was attending hacker conventions at age 16. In high school, he was hired to do consulting work as a “penetration tester”—a role that involves testing a company’s security and then helping to fix the breach. Later, working as a hacker for Internet Security Systems, he met Ryan Smith, who was a vulnerability researcher at the firm: basically, prodding at systems like Windows to find out how the software could be exploited. Two years ago, the pair launched Halcyon, a ransomware defense software that helps companies prevent cyberattacks and equips them with defensive software, which is a novel development in cybersecurity tech.

That “offense to defense” strategy is exactly what Bob Ackerman, founder of AllegisCyber Capital, looks for when he incubates and invests in early-stage cybersecurity startups. Ackerman explained that he seeks out founders that have spent their entire careers in cyber, and particularly have come out of the NSA or the Israeli equivalent, Unit 8200. “All of the innovation in cyber is actually paced by the offense,” he explained. “When you get to seed, there’s no revenue, there’s no product, and there’s no customers, so you’re really relying on [the founding team’s] domain expertise.”

Cybersecurity stands out from other sectors as especially technical and specialized—and right now it’s booming. As Fortune previously reported, the global cybersecurity market is expected to reach $403 billion by 2027—making the compound annual growth rate 12.5% from 2020 to 2027. VCs are searching for brilliant founders, and they’re often recruited to build tech with little to no business experience. (Many of the startups VCs have their eye on, or have invested in themselves, are incubated in cybersecurity foundries that recruit alums of national intelligence agencies to build cyberdefense tech.) VCs are looking to spot ideas that are differentiated and have a clear market application. “What you have to try to decipher is whether the problem that this business is solving is a feature, or is it truly a business?” says Maverick Ventures investor Matt Kinsella.

For this list, we asked the top VCs in cybersecurity to nominate startups. We asked them for names outside their portfolios, but read all the way to the bottom for some picks inside their portfolios.

Alethea

Ted Schlein of Ballistic Ventures nominated misinformation mitigation startup Alethea from his portfolio. The startup’s machine learning platform analyzes and detects misinformation and social media manipulation across the internet. In November 2022, the company raised $10 million in Series A funding from Ballistic Ventures. The company was founded in 2019 by Lisa Kaplan.

Read the full story here.

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