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Cybersecurity venture capital in region following trail of federal spending

• While regional growth outside of flexible space has been limited the past few years, one area that has grown tremendously is cyber: cyber related federal contract awards have grown 135% since 2010.

• A large percentage of both regional cybersecurity-related federal government contracts and venture capital activity have flowed to Northern Virginia. However, two abnormally large venture capital fundraising rounds have inflated Maryland’s totals:

• Tenable raised $250 million in 2015 in a Series B round

• Most recently in 2018, IronNet raised $78 million in Series B round

• Despite those two raises, the depth of activity in Northern Virginia has been far greater, with 108 funding rounds landing in Northern Virginia-based companies since 2010, compared to 67 in Maryland. 

• Northern Virginia’s cybersecurity venture capital fundraising volume has risen steadily since 2012, which has coincided with an increasing share of regional federal government cybersecurity contract awards. Maryland’s dependence on a handful of large fundraising rounds, however, has left cybersecurity venture capital activity inconsistent.

• The potential impact on the office market from Suburban Maryland to Baltimore City is large: the area’s largest cybersecurity success story, Tenable, recently preleased 150,000 s.f. of Class A new construction in Downtown Columbia. Today, however, the footprint of cybersecurity venture capital funded startups in Maryland is approximately 425,000 s.f., with a median size of only 3,650 s.f. In order to grow and attract venture capital investment, Maryland’s cybersecurity industry will need to mature from service-oriented companies catering towards government customers, to cybersecurity start ups that are developing products and platforms for commercial uses. Local and state government programs, including the Maryland Cybersecurity Investment Incentive Tax Credit, along with private industry efforts, such as DataTribe, a cybersecurity incubator, will help Maryland make the transition to developing platform-based cybersecurity companies that will generate greater, and more consistent venture capital fundraising. As the industry continues to mature locally, cybersecurity will have the potential to increasingly impact commercial real estate in a meaningful way.

Source: JLL Research

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