Speaker 1: So venture capital firms investing roughly three point one billie
Speaker 1: and into a record two seventy nine cybersecurity companies last year.
Speaker 1: That actually number sounds low because I feel like there's
Speaker 1: a new one coming to talk to us every week.
Speaker 1: But this data according to CB Insights. Here talk about
Speaker 1: the VC money and interest in cybersecurity specifically. Lonnie Jaffee,
Speaker 1: Managing director at Inside Venture Partners in our Bloomberg eleven
Speaker 1: three oh studio Inside Ventures, though based in New York.
Speaker 1: Nice to have you here, Welcome, great to be here,
Speaker 1: Thanks for having me. Tell me about I do feel
Speaker 1: like you know, um, I talked about this with my
Speaker 1: producer Paul Brennan. I say, it feels like here's another
Speaker 1: cybersecurity firm. M Are they that different? Are they all
Speaker 1: going to merge one day and they're just gonna be
Speaker 1: one big cybersecurity firms. Tell me a little bit about
Speaker 1: all the money go going into it, uh and the
Speaker 1: growth that we're seeing in this field. So it's one
Speaker 1: of the more important secular growth opportunities in the technology industry,
Speaker 1: and so a lot of entrepreneurs are looking to innovate
Speaker 1: in the space, and so that's attracting capital, it's attracting attention.
Speaker 1: A tremendous amount of the innovation is happening in smaller
Speaker 1: private companies and not in the traditional larger security software venders.
Speaker 1: Why is there so much going on in terms of cybersecurity?
Speaker 1: They're all doing different approaches And is it because there's
Speaker 1: all different type of kind of attacks and threats and
Speaker 1: concerns when it comes to cybersecurity. So one of the
Speaker 1: big secular changes that's happening is a shift from a
Speaker 1: perimeter based approach where you kind of locked down the
Speaker 1: outside of you shut down your walls, and two more
Speaker 1: of a kind of biological or an immune system approach
Speaker 1: to security where um so, so in the human body,
Speaker 1: you have your skin, and the skin protects you from
Speaker 1: viruses and bacteria. But if that's all you had, you
Speaker 1: would be in trouble, right, we also have the immune system,
Speaker 1: which is inside the body and it watches for things
Speaker 1: that are not the self and then it attacks those
Speaker 1: things and it can produce antibodies and um and that
Speaker 1: gives the immunity over time. And so some of the
Speaker 1: more interesting companies we're seeing are doing things that leverage
Speaker 1: artificial intelligence or various types of machine learning to learn
Speaker 1: over time what kind of attack vectors are going to
Speaker 1: be emerging and then and then address them. Kind of
Speaker 1: smart cybersecurity exactly. And it's smart in the sense. So
Speaker 1: one thing the companies themselves can get better over time
Speaker 1: as they get more customers their product, it's better, so
Speaker 1: they get good investments. But from a customer perspective, it's
Speaker 1: also great because the customers. The product improves as more
Speaker 1: customers start using it because they can essentially share antibodies
Speaker 1: with each other. That's really fast. But going back to
Speaker 1: how you would describe me, I feel like it's like
Speaker 1: a castle. Right. You have the wall and that's one
Speaker 1: way of protecting, and then you have the fighters within
Speaker 1: the wall that can kind of, you know, go specifically
Speaker 1: whatever kind of comes at them, and they and the
Speaker 1: fighters need to learn, right. So a lot of the
Speaker 1: child well, so like anti virus software as an example,
Speaker 1: you used to do things like look for specific signatures,
Speaker 1: and really what you're doing there is you're waiting for
Speaker 1: someone else to get attacked and then to publish the
Speaker 1: information about what the attack involved, and then you look
Speaker 1: for that specific thing. So we're invested in one company
Speaker 1: called Silence that does antivirus software, but it looks for
Speaker 1: things that viruses and worms like the want to Cry
Speaker 1: attack that lockdown people's computers and asked for bitcoin ransoms.
Speaker 1: It'll it'll learn what kinds of things they do instead
Speaker 1: of looking for a specific signature. So it will get
Speaker 1: better over time, and it can share the information between
Speaker 1: companies without sharing any proprietary So, Lonnie, what do you
Speaker 1: say to kind of investors? I think about our audience,
Speaker 1: do smart audience? You know who do see and we
Speaker 1: have on as guests. I mentioned a lot of cybersecurity
Speaker 1: companies that come in, Um, what are the questions that
Speaker 1: they need to be kind of being asked if they're
Speaker 1: thinking about investing in a cybersecurity company. So, if you're
Speaker 1: going to bet your business on a cybersecurity company as
Speaker 1: a as a customer, you need to make sure that
Speaker 1: they're going to be well resourced so resource to be successful,
Speaker 1: and that their product is is differentiated in a way
Speaker 1: that is not only better than the alternatives today, but
Speaker 1: we'll get better more quickly. So you know, being confused
Speaker 1: with that kind of machine learning that not only gets
Speaker 1: better within a given enterprise, but where you can share
Speaker 1: between enterprises, just an example. There's a company, dark Trace,
Speaker 1: that we invested in earlier this year. Um they have
Speaker 1: uh it's a group of British intelligence officers who got
Speaker 1: together with with mathematicians from the University of Cambridge and
Speaker 1: they built technology that uses sophisticated mathematics and it looks
Speaker 1: for anomalies, it gets it builds a sense of self
Speaker 1: within the company, and then it learns what's normal and
Speaker 1: what's normal is constantly changing. And then when it sees
Speaker 1: a problem, it'll be able to quarantine the the issue
Speaker 1: and then it allows you to address it. And and
Speaker 1: it also shares information not about your your company specifically,
Speaker 1: but about essentially the problem itself, so that other companies
Speaker 1: can react more quickly when an attack happens, and speed
Speaker 1: becomes absolutely essential. So are there things that you see
Speaker 1: in the news in terms of cyber texts you like
Speaker 1: that should have never happened. I know that there's the
Speaker 1: technology and the cybersecurity firms that are out there that
Speaker 1: this should never have happened. Well that the recent Equifax
Speaker 1: breach is a good example of one that was in
Speaker 1: some ways of very unforced error. Right. You had in
Speaker 1: March the Apache Struts project, a couple of researchers discovered
Speaker 1: that it had a vulnerability. They put out a patch
Speaker 1: on the same day. Months later, the patch still hadn't
Speaker 1: been deployed to the machines that got attacked, and UM
Speaker 1: and the attackers had months to just operate within the enterprise,
Speaker 1: building web hooks and taking a hundred and forty three
Speaker 1: million people's personal records, which comes at a huge personal cause.
Speaker 1: That's a ton of time in the digital world. It is, yeah,
Speaker 1: to kind of play around, poke around, grab information. Yeah,
Speaker 1: so that's the kind of thing where if you have
Speaker 1: an immune system running inside your enterprise, even if you
Speaker 1: even if you have an error and the perimeter you
Speaker 1: can sometimes catch those issues and address them. UM. I
Speaker 1: feel like cybersecurity continues to evolve, like everything else in
Speaker 1: this world just got about thirty seconds left here. What
Speaker 1: do you see as kind of some of the newer trends.
Speaker 1: I feel like ransomware was a big thing that we've
Speaker 1: been talking about over the past year. What happens next
Speaker 1: one thing I'm worried about and we haven't seen much
Speaker 1: of this, although we did see an example of it
Speaker 1: earlier this year in India. Is um is people using
Speaker 1: machine learning or AI for attacking, So systems that can
Speaker 1: go into a and learn how to avoid being caught,
Speaker 1: and you know that that will spark a bit of
Speaker 1: an arms race, so hopefully, so hopefully we won't see
Speaker 1: that anytime soon, and it becomes smarter and smarter and
Speaker 1: figuring out how to get in exactly. UM, this is
Speaker 1: a great conversation. Thank you, thank you. Hope you come
Speaker 1: back to here. Lonnie Jaffee, imagining director at Inside Venture Partners.
Speaker 1: They are based in New York City. Lonnie, in our
Speaker 1: New York eleven three oh studio on this Friday, you're
Speaker 1: listen to Bloomberg Markets. I'm Carol Masser in our Bloomberg
Speaker 1: eleven three oh studio and this is Bloomberg Radio.