Startups Drive Cybersecurity Innovation

Author

Alpha
July 30, 2024

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TECH IN THE NEWS

Grok Harvesting - Elon Musk’s X is under pressure from EU regulators over harvesting user data by default for Grok’s AI training pool.

International E-Commerce - 80 countries agree on global e-commerce rules (eg. recognition of e-cigs and fraud protection, US refuses to join.

Gaming Strike - SAG-AFTRA announced a strike for video game performers over AI protections in negotiations with major gaming studios.

Delayed Intelligence - Apple Intelligence will now launch in October with iOS 18.1, missing the September rollout of iOS 18 and the iPhone 16.

A $5b Loss - OpenAI’s 2024 training and inference costs could reach $7b, and it could lose $5b, need more funding within 12 months to stay afloat.

US Bitcoin Reserve?

1. Donald Trump outlined plans for a Bitcoin advisory council and a national BTC reserve at the Bitcoin convention.

2. Sen. Lummis unveils a bill for US Treasury to buy 1 million Bitcoin.

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THE HOTTEST THING IN TECH
Startups Drive Cybersecurity Innovation

The cybersecurity industry is experiencing a resurgence in investor enthusiasm after a major cool-off. Factors contributing include the recent CrowdStrike outage, and the GenAI boom. As a result, there’s been a notable uptick in VC, M&A and exit activity in the sector this year.

Google’s recent (rejected) $23b acquisition offer for cloud cybersecurity startup Wiz signals the potential for strong valuations in the sector. Wiz opted instead to IPO in 2025, showing confidence in growing its valuation. There has also been a recent rise in VC deal activity in the sector. Q2 2024 deal value grew 18% QoQ to $3.8B. 2024 exit activity already totals $6.9B across 48 deals, surpassing the amount for the entire 2023 year.

Cybersecurity Deal Flow

A couple of major cybersecurity raises are worth noting this week: Washington’s Chainguard raised a $140M Series C last week, achieving unicorn status with a $1.12b valuation for its supply chain cybersecurity platform. And San Fran’s Vanta raised $150M led by Sequoia at $2.45b with backing from the VC arms of Goldman Sachs and JPMorgan. This validates its’ position as a leader in automated cybersecurity and compliance.

Chances of an AI Cyber Apocalypse

The recent CrowdStrike outage has highlighted opportunities for startups to address gaps in existing solutions, particularly with the rise of AI. But what happens when AI is as integrated into our economy as Microsoft's cloud servers are now? Some experts have predicted a similar incident in that scenario could result in effects “10x worse” than July.

Alongside Vanta, a number of startups working on potential solutions have raised money just in the past week:

  • Palo Alto AI cloud cybersecurity startup Daz just raised $50M at $400M post-money. Its revenue is already up by 400% this year.

  • California startup Cowbell raised a $60M Series C to use AI to improve cyber insurance services for SMEs.

  • AI cybersecurity/disinformation startup Cyabra aims to go public at a valuation of $70M with clients including the State Department.

  • California’s ZeroTier raised a $13.5M Series A to secure routers + sensors.

The AI cybersecurity industry is expected to continue to grow in the coming years, which is likely to lead to continued investor and VC activity.

The future of AI cybersecurity

We are working with another startup that is innovating in the space. UlapX has partnered with the U.S. Cyber Command, U.S. Army Cyber, and U.S. Air Force to empower cyber practitioners to quickly gain network awareness and interact with cyber resources using GenAI. This system allows users to identify and surface network anomalies and take action via a secure, ‘explainable AI’-enabled chat interface and automated Cyber Bot.

“There’s more interest from investors, from buyers to try a new tool, just more interest in cyber in general. That means there’s going to be more incremental revenue generated for cyber…“

— Casber Wang, Partner at Sapphire Ventures.

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DEALS WE’RE WATCHING
Closed Deals:

Supply Chain AI Unicorn - New york AI startup Altana raised a $200M Series C led by the US Innovative Technology Fund at a valuation of $1b.

Cybersecurity Unicorn - Washington startup Chainguard raised a $140M Series C at a $1.12B valuation led by Redpoint, Lightspeed, and IVP, joined by Amplify, Mantis VC, Sequoia, and Spark.

Deals to Watch:

Cyabra - Israeli AI cybersecurity startup to go public on Nasdaq via a SPAC merger with Trailblazer at a valuation of 70M. Raised $16M privately and clients include U.S. State Department and Singapore's Mediacorp.

Funding Buzz Watch:

ArcLight Capital Partners - Boston firm’s new $500M unit will acquire and improve wind and solar projects, supporting demand from AI-driven data centers.

Turkey - To launch a $5b package to boost EV production to 1M cars/yr, will announce further incentives for various high tech areas totalling $30b.

Shanghai - China's commercial hub announced $13.79b in funds to boost its integrated circuit, biomedicine and AI industries.