Increased funding for API security start-ups in response to cyber threats

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API security is gaining more attention in recent years owing to the increasing cyber threats. In today's digital world, businesses rely heavily on web APIs to share data and interact with customers, which means they are exposed to potential cyber-attacks. This has led to a surge of venture capital into API security start-ups and companies who are trying to develop solutions for these new threats.

According to the Q1 2023 report on API security by Salt Security, one of the top API security providers, has reported a 400% rise in the number of distinct attackers over the last six months based on the Company’s customer data. Moreover, the company has also brought into light that 80% of these attacks were through authenticated APIs, which clearly indicates a massive rise in the API threats in recent times.

Businesses are taking this issue seriously, as it could mean the difference between a successful digital business model or a costly breach that affects customers and business operations. This has resulted in organizations across industries investing in API security solutions to protect their data and their customers from potential cyber threats.

With the rise in API threats, more and more funds are moving into API security start-ups to help secure our digital landscape. This trend is showing no signs of deceleration, as investors continue to pour money into these innovative companies. In the past three years alone, investments in API security firms have risen exponentially, with over $500 million being poured into companies such as Auth0, Cloudflare and Salt Security. That's a huge increase compared to where things were just five years ago—back then, investments were pretty much non-existent.

In addition to these, various early-stage start-ups have received funding from venture capitalists over the past one year. Some of these disruptive start-ups include:

• Israel-based API security start-up, Wib, received a funding of US$16 million from its existing investors as well as others with investments led by Koch Disruptive Technologies (KDT) along with Techstars, Venture Israel, Kmehin Ventures.
• Akto, an Indian API security start-up, received a seed funding round of US$4.5 million, led by Accel India.
• California-based Pangea Cyber raised US$26 million in Series B funding for development of products and drive adoption in December, 2022. The funding was led by Google Ventures and also supported by other investors including Okta ventures and Decibel.
• Traceable AI, one of the burgeoning start-ups in the U.S., also raised US$60 million in May,2022 with summing up to an amount of US$80 million since its inception in 2018. The funding, intended to be used for further fostering its growth in the competitive API security market, was led by Institutional Venture Partners (IVP) with Unusual Ventures, BIG Labs, and Tiger Global Management as additional investors.

This rapid increase isn't just because of the rising number of businesses seeking protection from threats. It's also due to the incredible advancements in technology that are making it easier and faster for companies to secure their APIs. By using cloud platforms such as Amazon Web Services or Microsoft Azure, companies can quickly set up an API-secured environment without needing to commit time or resources to building an internal solution.

Data breaches are gradually becoming unmanageable. Some of the leading companies such Linkedin, Venmo, Optus, and Twitter have witnessed consequential API security breaches in the past few years. One of the primary reasons for unruly breaches is the explosion in the API traffic, which according to Akmai Technologies, accounts for approximately 80% of the internet traffic currently. On an average an organization is expected to be managing over 15,000 APIs, which makes the huge share of traffic easy to crack. 

Moreover, traditional Web and network protection tools are incapable of protecting against the API security threats, which require advanced tools for identification and remediation of such attacks. The huge losses due to API related breaches in companies across the globe have directed various leading companies to look for advanced API protection tools and platforms. 

An increasing number of venture capital firms are investing in API security companies to reinforce the innovations in API security through advanced technologies such as AI and machine learning. Crowdstrike’s Falcon Fund, for example, announced its investment in the leading API security company Salt Security in September,2022. 

As the focus on API security grows, TechInsight360 expects more and more funds, investments, and attention will be directed towards protecting APIs. The scrutiny is expected to result in in-depth scrutiny of good security practices, proven technologies, and verified testing. In order for organizations to secure their APIs, it will be essential to stay up-to-date on the latest trends and understand what type of investments need to be made.