WEBVTT - China in the Lead for 'Quantum Supremacy'

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<v Speaker 1>This is Bloomberg Business Week with Carol Messer from Bloomberg Radio.

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<v Speaker 1>So Gartner's forecasting worldwide security and rest management spending to

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<v Speaker 1>exceed a hundred and fifty billion dollars this year. It's

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<v Speaker 1>grew about six point four percent last year. So some

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<v Speaker 1>of this, Gartner says, reflects continuing demand for remote worker

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<v Speaker 1>technologies and cloud security. It's the environment that we are

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<v Speaker 1>working within. Let's get some thoughts though on the space

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<v Speaker 1>and the investment opportunities as a result. Richard C. Wald

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<v Speaker 1>is founder and managing partner of Evolution Equity Partners. It's

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<v Speaker 1>an international VC investor focusing on cybersecurity and enterprise software companies.

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<v Speaker 1>Has over seven fifty million in assets under management. He

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<v Speaker 1>joins us on the phone from Zurich, Sitzerland, fingers crossed

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<v Speaker 1>that it's a clean connection. Richard. Nice to have you

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<v Speaker 1>here with us. Hi, Carol, thank you very much, pleasure

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<v Speaker 1>to be here. Here. You loud and clear, So I

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<v Speaker 1>think we're ready to go, and uh, you know, I

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<v Speaker 1>think you raise some important points there, and you know

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<v Speaker 1>we're going to talk about those in greater details. So uh,

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<v Speaker 1>you know, let's let's kick it off back at It

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<v Speaker 1>is a clean line and let's get going, as you say, So,

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<v Speaker 1>first of all, there is so much going on. I

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<v Speaker 1>talked with um uh Mr Turdoff, the former Homeland Security Secretary,

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<v Speaker 1>at a Bloomberg event, and you know, he says, the

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<v Speaker 1>big one is yet to come. Despite what we've seen

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<v Speaker 1>with the Colonial pipeline and GBS meat and you know,

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<v Speaker 1>we continue to see the frequency in the severity of

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<v Speaker 1>cyber attacks picking up. How do you see it? I mean,

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<v Speaker 1>I would tend to agree, and I think a good

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<v Speaker 1>way of looking at what the future holds is actually

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<v Speaker 1>going back a few years and understanding how we got

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<v Speaker 1>to where we are today. So if you look at

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<v Speaker 1>the last twenty years of the development of the cybersecurity

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<v Speaker 1>space as a market and the nature of the threat,

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<v Speaker 1>there's been a six significant and consistent trajectory UH of

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<v Speaker 1>a more as you mentioned, a more sophisticated, frequent and

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<v Speaker 1>UH pointed attack to UH infrastructure, enterprises and government around

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<v Speaker 1>the world. So when you turn back the clock twenty

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<v Speaker 1>years EVE around the post nine eleven era, Interestingly, the

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<v Speaker 1>security market is a cottage industry three billion of spand

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<v Speaker 1>relatively small because of the the numbers that you've indicated

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<v Speaker 1>just before. Over that first decade, the market grows exponentially

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<v Speaker 1>from three billions fifty billions, and so does the nature

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<v Speaker 1>of the attack, driven in part because of the increasing connectivity.

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<v Speaker 1>But as we move from two thousand ten to two

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<v Speaker 1>thousand twenty, the nature of the attack in the two

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<v Speaker 1>thousand eight financial crisis also begins to become more UH

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<v Speaker 1>significant and more threatnment infrastructure and enterprises globally. UM, we

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<v Speaker 1>start to see some of the same UH issue is

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<v Speaker 1>a rise postline eleven, post two thousand eight, and then

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<v Speaker 1>again in the COVID nineteen era. So some of the

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<v Speaker 1>consistent factors they're in post crisis era. Cyber attacks and

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<v Speaker 1>FROUD tend to increase quite significantly, and you start to

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<v Speaker 1>see next generation attacks emerge, and those next generation attacks

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<v Speaker 1>layered on UH later on the factor of work from home,

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<v Speaker 1>migration to the cloud, accelerated digitalization positions the current market

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<v Speaker 1>particularly vulnerable for those types of next generation attacks. And

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<v Speaker 1>you know, I'll pause there for any questions on that

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<v Speaker 1>to talk about where we go from that. Alright, hold

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<v Speaker 1>on a second, I do have to bring a headline

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<v Speaker 1>to our listeners and viewers on YouTube the United States

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<v Speaker 1>to black some solar goods made in China's Jang region

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<v Speaker 1>that province very important to China's history, a silk road

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<v Speaker 1>gateway to the West. UH, and we know that there

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<v Speaker 1>is a lot in terms of manufacturing going on that.

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<v Speaker 1>But again, this is just another example of some of

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<v Speaker 1>the tensions that still exist between the United States and China,

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<v Speaker 1>specifically when it comes to goods trade and other UM.

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<v Speaker 1>This is kind of a good setup, Richard. We've got

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<v Speaker 1>about a minute. We've got to do some news and

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<v Speaker 1>then we'll come back. But China. You are watching China

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<v Speaker 1>and their quest for quantum supremacy. Quantum supremacy is not

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<v Speaker 1>something we talk about a lot here on Bloomberg, but

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<v Speaker 1>we probably should. Absolutely. I think when you look out

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<v Speaker 1>three to five to seven years, the likelihood that a

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<v Speaker 1>quantum computer is in place that can cause UH and

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<v Speaker 1>and unravel some of the encryption algorithms that protect day

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<v Speaker 1>to day communication, UH, corporate secrets, government secrets start to

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<v Speaker 1>become vulnerable. UM. You know, we've actually invested in a

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<v Speaker 1>quantum cyber company that defends and protects against that vulnerability.

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<v Speaker 1>But certainly UH quantiments the elephants in the room. UH

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<v Speaker 1>companies are already body software to protect against that potential

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<v Speaker 1>vulnerability at fundam UH go live. Now there's there's a

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<v Speaker 1>lot of areas that relates to the current environment. I

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<v Speaker 1>want to get back to our guest, Robert's excuse me.

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<v Speaker 1>Richard c Wald found her imaging partner of Evolution Equity Partners.

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<v Speaker 1>It's an international venture capital firm. They are focusing on

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<v Speaker 1>cybersecurity companies, also enterprise software firms, and they have over

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<v Speaker 1>seven fifty million in assets under management. Richard still with

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<v Speaker 1>us on the phone from Zurich, Switzerland, and forgive me, Richard,

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<v Speaker 1>I had to cut you off. But um, we were

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<v Speaker 1>talking about quantum supremacy and China and their mission to

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<v Speaker 1>lead when it comes to that world. I mean this

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<v Speaker 1>is important. We're talking about, you know, kind of computer

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<v Speaker 1>advantages and performance over kind of existing computers, and we're

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<v Speaker 1>talking about you know, crazy calculations right at crazy speeds.

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<v Speaker 1>But it's able to give the person who has that

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<v Speaker 1>possesses that, uh certainly an advantage. Absolutely, And I think

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<v Speaker 1>when when you think about the the risk around quantum computing,

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<v Speaker 1>actually there's present day risk quantum computers, at least the

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<v Speaker 1>types of quantum computers that would pose threats to encryption

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<v Speaker 1>algorithms that protect databases and secrets of governments and enterprises

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<v Speaker 1>today are probably not prone today. However, our adversaries are

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<v Speaker 1>collecting data that's readily available, storing that data, and are

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<v Speaker 1>positioning themselves to be able to decrypt that data once

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<v Speaker 1>a quantum computer comes into play and is live. So

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<v Speaker 1>the threat actually exists today, and companies are already arming

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<v Speaker 1>themselves and protecting against that scraping of data and secretion

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<v Speaker 1>of data that happens through cyber breaches and other methodologies.

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<v Speaker 1>So we are already in the era of UH, you know,

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<v Speaker 1>quantum computers and the fact that prompt quantum computers have

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<v Speaker 1>impact on the way enterprises protect their UH intellectual property

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<v Speaker 1>and secrets. So tell us about the crop of companies

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<v Speaker 1>that you are investing that you think will be the

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<v Speaker 1>ones that will be protecting others going forward. Absolutely, So

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<v Speaker 1>I'll talk about two or three that UH respond directly

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<v Speaker 1>to some of the threats and and hacks that you've

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<v Speaker 1>seen over the last six months. And when you think

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<v Speaker 1>about solar winds, one of the things to understand about

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<v Speaker 1>the solar winds hack has been that the attack surface

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<v Speaker 1>around UH companies and software developers has expanded exponentially over

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<v Speaker 1>the last couple of years. And what that means is

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<v Speaker 1>while UH software developers are are building software, they're prone

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<v Speaker 1>to hackers who inject malware into that software development phase,

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<v Speaker 1>and then the supply chain of software and is prone

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<v Speaker 1>to those security hacks. So that's what happened in Solar Winds.

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<v Speaker 1>We invested in the company called Group Blue Bracket, leading

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<v Speaker 1>a series a round earlier this year. Blue Bracket addresses

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<v Speaker 1>that risk head on, providing UH security tools to death

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<v Speaker 1>and set up UH engineers to protect against that increasing

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<v Speaker 1>correct UH for developers in terms of developing technology. So

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<v Speaker 1>it's one of the things that the Presidential Executive Order

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<v Speaker 1>addressed UH cyber security and the software supply chain. Group

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<v Speaker 1>at Bracket addresses that head on. Second company that we've

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<v Speaker 1>invested in a number of years company called Security Scorecard.

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<v Speaker 1>Security Scorecard is the Moodies of cyber security. They rate

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<v Speaker 1>up twenty million companies worldwide on their cyber posture. It

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<v Speaker 1>allows for chief security officers to UH translate cyber risks

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<v Speaker 1>to boards of directors and essential I would say chasm

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<v Speaker 1>that has been broken down with the technology that security

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<v Speaker 1>software provides and that's important because board members need to

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<v Speaker 1>understand UH cyber risk in order to deploy investment into

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<v Speaker 1>UH the the cyber infrastructure that's required to defend against

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<v Speaker 1>these advanced threats. I mentioned Quantum, a company there that

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<v Speaker 1>we've invested market UH defending against that that potential of

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<v Speaker 1>a Quantum hacked. The company in fact announces fact murder

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<v Speaker 1>and UH will be a public company on NASDAC over

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<v Speaker 1>the next UH the next couple of months, and they're

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<v Speaker 1>actually helped me out there. My understanding is they're involved

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<v Speaker 1>with launching some satellites right to protect against growing hacking threats.

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<v Speaker 1>Absolutely so UH. One of the ways to UH protect

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<v Speaker 1>against the quant of hack is to be able to

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<v Speaker 1>effectively distribute keys such that the key infrastructure, UH cryptographical

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<v Speaker 1>key infrastructure becomes more defensible. And they're able to do

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<v Speaker 1>that with novel technology that they developed H and providing

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<v Speaker 1>that that type of key distribution through satellites, which can

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<v Speaker 1>be distributed around the world UH safely protecting devices, computers,

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<v Speaker 1>and other endpoint caught ups that are out there right.

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<v Speaker 1>So essentially a backbone of of encryption keys or secure keys,

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<v Speaker 1>if you will, UM within data centers around the world.

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<v Speaker 1>It's really fascinating how this is evolving. How do you

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<v Speaker 1>see it ultimately, Richard playing at some point, is there

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<v Speaker 1>an aggregator, uh, you know, a salesforce of the cybersecurity

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<v Speaker 1>world or will continue in your view to be these

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<v Speaker 1>kind of young startups that are kind of trying to

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<v Speaker 1>stay ahead of the curve when it comes to the

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<v Speaker 1>cybersecurity world. And just got about uh forty seconds left

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<v Speaker 1>here just quickly. Sure, great question. So I think you're

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<v Speaker 1>seeing an increase in the number of cybersecurity companies that

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<v Speaker 1>are growing public. With that, you're going to see continued

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<v Speaker 1>consolidation stuff that these platforms of positions to upsell and

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<v Speaker 1>clause cell products into their uh uh installed base. Uh.

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<v Speaker 1>You're going to see a else force dot com type

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<v Speaker 1>of cybersecurity company that's an aggregator that has end to

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<v Speaker 1>end uh product capability. And I think you're already starting

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<v Speaker 1>to see that in some of the public holistic platforms

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<v Speaker 1>out there. See more of that as time goes on. Listen,

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<v Speaker 1>this was a great conversation. I hope we can get

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<v Speaker 1>you back because it's certainly an evolving, uh and developing

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<v Speaker 1>world that's certainly a very crucial world. As we have

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<v Speaker 1>seen Richard. Thanks Richard c Wald, founder imaging partner, Evolution

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<v Speaker 1>Equity Partners on a very clear line from Zurich, Switzerland,

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<v Speaker 1>so it was so good to get his thoughts