1. Security Startups The Good, Bad & Ugly April 14, 2015
CONFIDENTIAL
Security Startups The Good, Bad & Ugly April 14, 2015

2. Background Background Entrepreneur, Investor and Author
Conceived and launched SF Bay Area’s first cyber security accelerator
Invested in 50+ startups
Author of 2 books:
“The Business of Venture Capital” (2014)
The art and science of being a VC
“Startup Boards” – Co-author w/ Brad Feld (2014)
How to maximize your board’s value

3. Cyber-security startups Investment trends and opportunities
Agenda
Cyber-security startups
Investment trends and opportunities
Fireside chat

4. The Good

5. The dawn of cloud security
Source: Amazon estimates based on 1000 compute cycles (300 compute cycles, 700 peak cycles) and data transfer (3000 GB of In data and 6,000 GB of “out” data).
Source: Gartner, “Private Cloud Matures, Hybrid Cloud Is Next,” Thomas J. Bittman,

6. Security innovation lags technology innovation
Source: Managing Storage: Trends, Challenges, and Options ( ). (EMC, 2013) survey of 1000 IT professionals in 800 organizations

7. Evolution of cybersecurity
Then
Security
Perimeter based
Applications
On Premise
Threats
Static
Types of adversaries
Technical chops
Frequency of attacks ??
Security Assessment
Periodic
Cyber-security Products
Good enough
Now
Data based
SaaS / Cloud
Dynamic
Financially / Political motivated
200 / minute
Real Time / Continuous
Precision, Relevance & Speed
Impact / Opportunities
Mobile /Encryption/ Key Management
Security-as-a-service
Event Management / Incident Response
Regulation
Monitoring tools
Vulnerability / Pen Testing
Contextual relevance

8. The established and the new

9. The dance of giants
* Business Week / BCG CEO Most Innovative Companies Survey; Accenture CEO Survey, 2014

10. The Bad

11. Security spending to reach $86 bn
Source: Gartner

12. Yet, most enterprises lack security capabilities

13. Security Sector Highlights
Cloud and Virtualization Trends
Volume of Data has exploded
Monitoring Virtual Machines / Cloud
BYOX Endpoints and access points have increased
Consumerization of IT creates headaches for CISOs
Visibility on security
Technological Complexity
Key takeaway:
Fragmented market
Large number of tools / vendors
Quality of tools is just about “Good Enough”
Shift towards Managed Security Service Providers (MSSPs)
Potential acquirers face structural challenges
Financial drivers
Political motivations – theft of IP
Reputational damage
Sophisticated adversaries
Minimal investment can create significant damage
Systematic efforts – Target and Home Depot used the same payload
Motivated adversaries

14. And the Ugly

15. The rise of crimeware
Source: Verizon DBIR 2015

16. Phishing in the sea
Source: Verizon DBIR 2015

17. No sector left behind

18. VC Funding in cyber security
Source: Crunchbase

19. Management Market What VCs look for Size of the market (How big?)
What VCs looks for
Management
First mover advantage
Entrepreneurial expertise
Domain expertise / Thought Leaders
Tenacity and Comfort in Ambiguity
Team cohesion
Market
Size of the market (How big?)
End User (Who cares?)
Willing to pay (How much?)
Sense of urgency (How fast?)

20. The VC dilemma
The information required to make decisive investments in disruptive technology simply does not exist…
It needs to be created through fast, inexpensive and flexible forays into the market
– Clayton Christensen, The Innovator’s Dilemma

21. VC Funding – it always takes longer

22. Security Investments
Attention: Appreciation of security in the era of WhatsApp
Value: Feature v Platform
Niche versus broad
Sales: Fear based / ROI / Self-serve
Noisy / Fragmented Market: Overwhelmed CISOs
Returns: No Unicorns
Fireye took 10+ years to go IPO

23. Summary The dawn of innovation Its always hard Capital and Customers
It takes 2X as longer
Patience and fortitude
Fact: The adversary is making more money than the entrepreneurs & VCs combined

24. Thank you
Mahendra Ramsinghani