Privacy is booming. Allison Schiff, managing editor for AdExchanger.com, has called the recent trends in the privacy technology market the “smart-nerdy-girl-removes-her-glasses-and-is-suddenly-sexy moment”. It is an accurate description: for a long time, privacy was a subject being discussed in the back rooms of law firms and on side stages of conferences.
Nowadays, privacy is top of the list on term sheets of investors and being discussed center stage. That being said, let’s look into what is actually happening in the privacy market, why we see these changes and what the future holds.
Close to 10 billion dollars per year are invested in venture-back privacy and security companies. That’s even without taking into account private equity rounds or the investments tech corporations make themselves in privacy-focused products or spin-offs. In the last five years, the number of companies that operationalize privacy governance and offer technology solutions to cater to privacy needs have multiplied by a factor eight.
Investors seem to be doubling down on privacy. Momei Qu, Senior Vice President at PSP Growth - an equity firm investing in high-growth tech startups - puts it like this: “privacy is a huge trend that affects almost all industries and functions on a global scale”. Many other venture capitalists seem to agree and are actively investing in the privacy space.
But why is so much money flowing into the privacy sector? Many argue that the rise of data protection regulations is one driver of this trend: Privacy laws are being implemented around the globe, establishing stricter obligations for organizations and companies on how personal data must be handled and processed.
Compliance has become a huge factor for companies, as privacy laws introduce heavy fines for infringements: Under GDPR, infringements can lead to fines of up to 20 million euros or 4% of annual global turnover – whichever is greater. Many privacy startups in the b2b sector cater to the compliance needs of larger companies.
At the same time, privacy has become more important to users. McKinsey reports that consumers are becoming increasingly aware of and intentional about their data privacy, while simultaneously lacking trust in organizations they share data with. Categorized by sectors, healthcare and financial services achieved the highest score for users’ trust with only 44 percent. Other market segments are in even worse position: Only about 17 percent of surveyed consumers said that they trust technology companies. Consumer trust levels are even lower for the media and entertainment sector (10%).
As a result, market opportunities are arising for tools and services that give consumers greater control over their personal information. And users are acting upon this: According to the Harvard business review, 32% of consumers not only have said that they care about privacy, but have actually taken action and switched services or providers based on data-sharing and privacy concerns.
Along these lines, various startups are challenging the dominant companies on the market by offering even more comprehensive solutions to protect users' privacy and data.
The trends seem to promise that, firstly, we will likely see even more innovations and disruptions in the privacy sector. Many of the investments are seed and early-stage deals, meaning the full potential of these companies is yet to be unleashed. Also, there is no indication that the investments fostering innovation in the privacy field are going away. Secondly, it seems promising that user’s privacy will - overall - further improve over the next few years.
On the one hand, new technologies and services are being developed to meet the privacy demands of users. On the other, there is evidence that new proposals and standards, for instance like topic-based targeting, will create a more private online environment in general.
Learn more about how privacy brings value to business by registering for the next PrivacyConnect virtual session, hosted by OneTrust, where Cornelius Witt, Group Data Protection Officer at eyeo, will continue the discussion on privacy trends and recent findings with Lorena Marciano, Legal Director at Cisco.