Physical security ends 2009 attracting more than $1.5b in global investments
I can't decide if that seems like a big number or not. That $1.5 billion in global investments number comes from VB/Research, who sent over today their summary of 4Q 2009, and 2009 as a whole. They specialize in examining private equity and other activity in the "Security (IT & Homeland) and Defense sector" (they always put that parentheses in there, and it still leaves open the question of whether that includes commercial security, but they do cover that as well). Of course, some of these numbers are open to interpretations of categorization. For example, they list Meru Networks' money raising as being part of physical security (it's an "enabling technology"), but I've never seen them active in physical security at all, despite the obvious utility of their wireless LAN technology. Still, I think their summary of the space is interesting:
A cursory glance at global investment volumes in 4Q09 suggests that the Security (IT & Homeland) and Defense sector has fully recovered from the global credit crunch.Oooo, that sounds good. Tell me more.
Total investment volumes in private companies (including venture capital, private equity investment and buyouts) soared to $2.9 billion in 4Q09, equating to a 93% increase on 3Q09 and a 61% uplift on average quarterly investment levels during 2009.Yowzers! 93 percent up!
Such an interpretation is in fact misleading.Bummer. You had me there, VB/Research.
Investment in 4Q09 was boosted almost entirely by General Atlantic LLC's $1.65 billion buyout of TASC from Northrop Grumman, by far the largest disclosed transaction in the sector this year. Although investment in Security (IT & Homeland) and Defense, and more specifically the Defense vertical, has historically been characterised by a small number of large buyouts, this specific transaction is not indicative of underlying positive economic indicators or burgeoning optimism within the sector, rather by external factors discussed in greater detail in the body of this report.So, not so good, it turns out. And when you look at physical security, specifically, pulling out IT and defense, then you get that $1.5 billion number for the entire year (which looks kind of small now...). Further, more than $550 million of that investment is in those "enabling" technologies I was talking about, which pulls the real part of the sector below $1 billion for 2009. You know video surveillance, that super-hot sector? Yeah, it attracted just $150 million in 2009, only eight percent of the total investment, dwarfed by $330 million dumped into alarm systems. Interestingly, though, VB/Research sees hot times ahead for physical security:
In H209 VB/Research interviewed c.400 CEOs, CTOs, CFOs, venture capital, private equity and other institutional investors in the Security (IT & Homeland) & Defense sector to uncover fertile areas for investment in 2010. Physical security is forecast to be the main area of investment activity in H1 2010, accounting for 47% of all early-stage companies currently seeking funding. Within the physical security sub-sector the three areas expected to show greatest early-stage investment activity are: visual surveillance (26%), detection, sensor & imaging technology (22%) and audio & electronic surveillance (18%).So, we'll see if things pick up as expected. Worth watching.