Businesses are increasing their application security budgets in 2023

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Businesses are becoming increasingly reliant on application programming interfaces (APIs). Cloud computing, demand for mobile applications, and the API economy as a business model have driven the API explosion over the last few years. The average number of APIs used by medium and large-scale organizations often runs into several thousand. This creates a massive attack surface and cyber-attackers know it.

Recently, unprotected APIs emerged as the leading cause behind popular data beaches at T-Mobile and Optus. In the case of the T-Mobile data breach, which resulted in a data leak of more than 37 million customers, intruders targeted APIs to gain access. As per the SEC filing, the breached API belonged to an unknown, and therefore, unprotected shadow asset. For Optus, as well, unsecured API was the reason behind the data breach that compromised the sensitive information of about 9.8 million customers in Australia. 

In addition to T-Mobile and Optus, other leading names such as Microsoft, Facebook, and Venmo have also faced similar events recently. These API-related data breaches are not only impacting the reputation of large organizations, but such cyberattacks are also causing losses in millions of dollars. Consequently, to avoid such unforeseen events, businesses are increasing their application security budgets worldwide in 2023.

A few of the areas where businesses are expected to increase their investment in application security involve security training and education, acquiring security testing tools, compliance, and auditing.

The growing number of API security-related breaches, coupled with the growing application security budgets of businesses, has resulted in a perfect growth environment for the API security market. Over the last few years, several new startups have emerged in the space, seeking to offer API security-related services to businesses of all sizes and across all industries. With the application security market growing at a rapid rate and expected to continue on an accelerated growth trajectory, these startups are also attracting venture capital and private equity funding globally.

• Secure Blink, in February 2023, announced that the firm had raised an undisclosed amount of seed funding from United States-based venture capital firm Expert Dojo. The capital round will provide Secure Blink with the resources to accelerate its growth and further strengthen its position in the fast-growing application security market. The India-based startup was incubated by DSCI National CoE.
• In December 2022, FireTail, another API security-focused startup, announced that the firm had raised US$5 million in a funding round that was led by Paladin Capital Group. The early-stage financing round also included participation from General Advance, Secure Octane, Zscaler, and angel investors. The startup was founded in 2021 and is based in Virginia. Since its launch, the API security platform has seen adopters across Asia Pacific, North America, and Europe. The funding round is expected to assist the firm in further expanding its coverage to more geographies.
• Another application security firm ArmorCode, in November 2022, announced that the firm had raised US$14 million in its Series A funding round, which was led by Ballistic Ventures. Sierra Ventures and Cervin Ventures also participated in the Series A round. The firm, which is also based in the United States, is expected to use the funding for accelerating its growth in the segment.
• In November 2022, Wib, the fast-growing firm in the API security space, also announced that the firm had raised US$16 million in an investment round, which was led by Koch Disruptive Technologies. The security platform offered by the firm provides businesses with complete visibility across the API landscape. This helps organizations in reducing and hardening their API surface attacks.

Alongside fundraising deals, the merger and acquisition trend are also expected to grow significantly in the sector in 2023. Big players are seeking potential buyout opportunities to further bolster their service offerings in the API security segment. Some of the recent deals in the API security market include the acquisition of Polar Security by IBM in May 2023. Palo Alto Networks, in December 2022, acquired Cider Security.

As the applications security budget continues to rise in 2023 and beyond, TechInsight360 expects more such fundraising and mergers and acquisition deals to take place in the global market. This will keep aiding the growth of the application security market over the next three to four years, while also boosting the competitive landscape globally from the short to medium-term perspective.