Speaker 1: This is Bloomberg Business Week with Carol Messer from Bloomberg Radio.
Speaker 1: So Gartner's forecasting worldwide security and rest management spending to
Speaker 1: exceed a hundred and fifty billion dollars this year. It's
Speaker 1: grew about six point four percent last year. So some
Speaker 1: of this, Gartner says, reflects continuing demand for remote worker
Speaker 1: technologies and cloud security. It's the environment that we are
Speaker 1: working within. Let's get some thoughts though on the space
Speaker 1: and the investment opportunities as a result. Richard C. Wald
Speaker 1: is founder and managing partner of Evolution Equity Partners. It's
Speaker 1: an international VC investor focusing on cybersecurity and enterprise software companies.
Speaker 1: Has over seven fifty million in assets under management. He
Speaker 1: joins us on the phone from Zurich, Sitzerland, fingers crossed
Speaker 1: that it's a clean connection. Richard. Nice to have you
Speaker 1: here with us. Hi, Carol, thank you very much, pleasure
Speaker 1: to be here. Here. You loud and clear, So I
Speaker 1: think we're ready to go, and uh, you know, I
Speaker 1: think you raise some important points there, and you know
Speaker 1: we're going to talk about those in greater details. So uh,
Speaker 1: you know, let's let's kick it off back at It
Speaker 1: is a clean line and let's get going, as you say, So,
Speaker 1: first of all, there is so much going on. I
Speaker 1: talked with um uh Mr Turdoff, the former Homeland Security Secretary,
Speaker 1: at a Bloomberg event, and you know, he says, the
Speaker 1: big one is yet to come. Despite what we've seen
Speaker 1: with the Colonial pipeline and GBS meat and you know,
Speaker 1: we continue to see the frequency in the severity of
Speaker 1: cyber attacks picking up. How do you see it? I mean,
Speaker 1: I would tend to agree, and I think a good
Speaker 1: way of looking at what the future holds is actually
Speaker 1: going back a few years and understanding how we got
Speaker 1: to where we are today. So if you look at
Speaker 1: the last twenty years of the development of the cybersecurity
Speaker 1: space as a market and the nature of the threat,
Speaker 1: there's been a six significant and consistent trajectory UH of
Speaker 1: a more as you mentioned, a more sophisticated, frequent and
Speaker 1: UH pointed attack to UH infrastructure, enterprises and government around
Speaker 1: the world. So when you turn back the clock twenty
Speaker 1: years EVE around the post nine eleven era, Interestingly, the
Speaker 1: security market is a cottage industry three billion of spand
Speaker 1: relatively small because of the the numbers that you've indicated
Speaker 1: just before. Over that first decade, the market grows exponentially
Speaker 1: from three billions fifty billions, and so does the nature
Speaker 1: of the attack, driven in part because of the increasing connectivity.
Speaker 1: But as we move from two thousand ten to two
Speaker 1: thousand twenty, the nature of the attack in the two
Speaker 1: thousand eight financial crisis also begins to become more UH
Speaker 1: significant and more threatnment infrastructure and enterprises globally. UM, we
Speaker 1: start to see some of the same UH issue is
Speaker 1: a rise postline eleven, post two thousand eight, and then
Speaker 1: again in the COVID nineteen era. So some of the
Speaker 1: consistent factors they're in post crisis era. Cyber attacks and
Speaker 1: FROUD tend to increase quite significantly, and you start to
Speaker 1: see next generation attacks emerge, and those next generation attacks
Speaker 1: layered on UH later on the factor of work from home,
Speaker 1: migration to the cloud, accelerated digitalization positions the current market
Speaker 1: particularly vulnerable for those types of next generation attacks. And
Speaker 1: you know, I'll pause there for any questions on that
Speaker 1: to talk about where we go from that. Alright, hold
Speaker 1: on a second, I do have to bring a headline
Speaker 1: to our listeners and viewers on YouTube the United States
Speaker 1: to black some solar goods made in China's Jang region
Speaker 1: that province very important to China's history, a silk road
Speaker 1: gateway to the West. UH, and we know that there
Speaker 1: is a lot in terms of manufacturing going on that.
Speaker 1: But again, this is just another example of some of
Speaker 1: the tensions that still exist between the United States and China,
Speaker 1: specifically when it comes to goods trade and other UM.
Speaker 1: This is kind of a good setup, Richard. We've got
Speaker 1: about a minute. We've got to do some news and
Speaker 1: then we'll come back. But China. You are watching China
Speaker 1: and their quest for quantum supremacy. Quantum supremacy is not
Speaker 1: something we talk about a lot here on Bloomberg, but
Speaker 1: we probably should. Absolutely. I think when you look out
Speaker 1: three to five to seven years, the likelihood that a
Speaker 1: quantum computer is in place that can cause UH and
Speaker 1: and unravel some of the encryption algorithms that protect day
Speaker 1: to day communication, UH, corporate secrets, government secrets start to
Speaker 1: become vulnerable. UM. You know, we've actually invested in a
Speaker 1: quantum cyber company that defends and protects against that vulnerability.
Speaker 1: But certainly UH quantiments the elephants in the room. UH
Speaker 1: companies are already body software to protect against that potential
Speaker 1: vulnerability at fundam UH go live. Now there's there's a
Speaker 1: lot of areas that relates to the current environment. I
Speaker 1: want to get back to our guest, Robert's excuse me.
Speaker 1: Richard c Wald found her imaging partner of Evolution Equity Partners.
Speaker 1: It's an international venture capital firm. They are focusing on
Speaker 1: cybersecurity companies, also enterprise software firms, and they have over
Speaker 1: seven fifty million in assets under management. Richard still with
Speaker 1: us on the phone from Zurich, Switzerland, and forgive me, Richard,
Speaker 1: I had to cut you off. But um, we were
Speaker 1: talking about quantum supremacy and China and their mission to
Speaker 1: lead when it comes to that world. I mean this
Speaker 1: is important. We're talking about, you know, kind of computer
Speaker 1: advantages and performance over kind of existing computers, and we're
Speaker 1: talking about you know, crazy calculations right at crazy speeds.
Speaker 1: But it's able to give the person who has that
Speaker 1: possesses that, uh certainly an advantage. Absolutely, And I think
Speaker 1: when when you think about the the risk around quantum computing,
Speaker 1: actually there's present day risk quantum computers, at least the
Speaker 1: types of quantum computers that would pose threats to encryption
Speaker 1: algorithms that protect databases and secrets of governments and enterprises
Speaker 1: today are probably not prone today. However, our adversaries are
Speaker 1: collecting data that's readily available, storing that data, and are
Speaker 1: positioning themselves to be able to decrypt that data once
Speaker 1: a quantum computer comes into play and is live. So
Speaker 1: the threat actually exists today, and companies are already arming
Speaker 1: themselves and protecting against that scraping of data and secretion
Speaker 1: of data that happens through cyber breaches and other methodologies.
Speaker 1: So we are already in the era of UH, you know,
Speaker 1: quantum computers and the fact that prompt quantum computers have
Speaker 1: impact on the way enterprises protect their UH intellectual property
Speaker 1: and secrets. So tell us about the crop of companies
Speaker 1: that you are investing that you think will be the
Speaker 1: ones that will be protecting others going forward. Absolutely, So
Speaker 1: I'll talk about two or three that UH respond directly
Speaker 1: to some of the threats and and hacks that you've
Speaker 1: seen over the last six months. And when you think
Speaker 1: about solar winds, one of the things to understand about
Speaker 1: the solar winds hack has been that the attack surface
Speaker 1: around UH companies and software developers has expanded exponentially over
Speaker 1: the last couple of years. And what that means is
Speaker 1: while UH software developers are are building software, they're prone
Speaker 1: to hackers who inject malware into that software development phase,
Speaker 1: and then the supply chain of software and is prone
Speaker 1: to those security hacks. So that's what happened in Solar Winds.
Speaker 1: We invested in the company called Group Blue Bracket, leading
Speaker 1: a series a round earlier this year. Blue Bracket addresses
Speaker 1: that risk head on, providing UH security tools to death
Speaker 1: and set up UH engineers to protect against that increasing
Speaker 1: correct UH for developers in terms of developing technology. So
Speaker 1: it's one of the things that the Presidential Executive Order
Speaker 1: addressed UH cyber security and the software supply chain. Group
Speaker 1: at Bracket addresses that head on. Second company that we've
Speaker 1: invested in a number of years company called Security Scorecard.
Speaker 1: Security Scorecard is the Moodies of cyber security. They rate
Speaker 1: up twenty million companies worldwide on their cyber posture. It
Speaker 1: allows for chief security officers to UH translate cyber risks
Speaker 1: to boards of directors and essential I would say chasm
Speaker 1: that has been broken down with the technology that security
Speaker 1: software provides and that's important because board members need to
Speaker 1: understand UH cyber risk in order to deploy investment into
Speaker 1: UH the the cyber infrastructure that's required to defend against
Speaker 1: these advanced threats. I mentioned Quantum, a company there that
Speaker 1: we've invested market UH defending against that that potential of
Speaker 1: a Quantum hacked. The company in fact announces fact murder
Speaker 1: and UH will be a public company on NASDAC over
Speaker 1: the next UH the next couple of months, and they're
Speaker 1: actually helped me out there. My understanding is they're involved
Speaker 1: with launching some satellites right to protect against growing hacking threats.
Speaker 1: Absolutely so UH. One of the ways to UH protect
Speaker 1: against the quant of hack is to be able to
Speaker 1: effectively distribute keys such that the key infrastructure, UH cryptographical
Speaker 1: key infrastructure becomes more defensible. And they're able to do
Speaker 1: that with novel technology that they developed H and providing
Speaker 1: that that type of key distribution through satellites, which can
Speaker 1: be distributed around the world UH safely protecting devices, computers,
Speaker 1: and other endpoint caught ups that are out there right.
Speaker 1: So essentially a backbone of of encryption keys or secure keys,
Speaker 1: if you will, UM within data centers around the world.
Speaker 1: It's really fascinating how this is evolving. How do you
Speaker 1: see it ultimately, Richard playing at some point, is there
Speaker 1: an aggregator, uh, you know, a salesforce of the cybersecurity
Speaker 1: world or will continue in your view to be these
Speaker 1: kind of young startups that are kind of trying to
Speaker 1: stay ahead of the curve when it comes to the
Speaker 1: cybersecurity world. And just got about uh forty seconds left
Speaker 1: here just quickly. Sure, great question. So I think you're
Speaker 1: seeing an increase in the number of cybersecurity companies that
Speaker 1: are growing public. With that, you're going to see continued
Speaker 1: consolidation stuff that these platforms of positions to upsell and
Speaker 1: clause cell products into their uh uh installed base. Uh.
Speaker 1: You're going to see a else force dot com type
Speaker 1: of cybersecurity company that's an aggregator that has end to
Speaker 1: end uh product capability. And I think you're already starting
Speaker 1: to see that in some of the public holistic platforms
Speaker 1: out there. See more of that as time goes on. Listen,
Speaker 1: this was a great conversation. I hope we can get
Speaker 1: you back because it's certainly an evolving, uh and developing
Speaker 1: world that's certainly a very crucial world. As we have
Speaker 1: seen Richard. Thanks Richard c Wald, founder imaging partner, Evolution
Speaker 1: Equity Partners on a very clear line from Zurich, Switzerland,
Speaker 1: so it was so good to get his thoughts