VC Investment Bubble And Security Startup Boom Dr. Fengmin Gong Co-Founder & Chief Strategy Officer Target the threats that target you. Outline o Cloudy With A Chance Of Bubble o White Hot Security Startup o What’s China Got To Do With It? o White-Hot Cybersecurity Market o What’s There For You? Billion Dollar Club, Exciting! o If you are in NOW, and can exit BEFORE the bubble bursts Are You In It? o Congratulations if you are o Otherwise, no despair, I am only showing the top 8 Interesting Unicorn Stats Total tracked Still private (2015/2) In China All Industry 116 96 19 Software 35 31 0 Software/Security 7 7 0 Consumer Internet 25 23 5 o “The Billion Dollar Startup Club”, Wall Street Journal, By Scott Austin, Chris Canipe and Sarah Slobin http://graphics.wsj.com/billion-dollar-club/ Two Paths Of Successful Exit o IPO – Initial Public Offering oDrought season since PANW, FEYE o Merge & Acquisition oTerm Sheet – Monday, August 31, 2015 “The only thing growing faster than M&A activity in 2015 is withdrawn M&A activity. Thomson Reuters reports that while global M&A is up 37% year-to-date, the bump in canceled deals is a whopping 53% (representing nearly $336 billion in pulled transactions).” Chance Of Bubble With VC Investment? Bubbles Are Anomalies In The Market Spectacular Bubbles Of The Past Dutch Tulip price bubble 1636 Stock Market bubble 1929 South Sea Company stock price bubble 1720 Housing Market bubble 2008 Dot-com Stock bubble 2000 ? VC Valuation Hype Factors 1. 2. 3. 4. Strong Motivation Deep Pocket Overflowing Euphoria Inability To See With Clarity F1 – 10 Billion Exits o FOMO Syndrome o“Fear Of Missing Out” We missed out on FAGA once! oData analytics is hot, we’ve got to invest! o But they can’t tell if others are greedy or fearful now  F2 – Too Much Money o QE-I, QE-2, 0% Fed rate o “Past performance does not guarantee future return, but look at FAGA – Facebook, Amazon, Google, Apple – success!” o Greed is infectious - retirement fund, mutual fund moved from public market to VC investment! o Maybe, 10-year cycle makes VC investment less of a “venture” Euphoria Definition is medically recognized as a mental and emotional condition in which a person experiences intense feelings of well-being, elation, happiness, excitement and joy o Success recipe: user count now, monetize later o Making It Big without IPO: oWhatsapp bought @$21.8B; Snapchat valued @$16B F4 – Desire Versus Ability o Clarity For Potential-Reality distance, ROI oLack of domain expertise by VCs oLack of historical data on new tech areas o Less visibility into private companies According To Robert Shiller Should You Invest In Stock Market? oYes 4 US Market oStart early oDollar price averaging oBuy index fund oCaution 4 China Market oBrave ones: follow the government the FIRST TIME oWeak of heart: watch with patience, invest when gov stays away Cybersecurity Startup Opportunity Is Exceptional o Sophisticated financial & data crimes oCarbanak attack on banks o“Pump & Dump” attack on Wall Street oAnthem, Blue cross and Blue shield, OPM breaches Continuous Monitoring Incident Response o More useful tools o Practicing security o Government rules & regulations Risk Management The Market Is White-Hot o Per Alberto Yepez, Managing Director, Trident Capital o$1.77 Billion VC investment 2014 compared to $1.62 Billion in 2000 oTotal $7.3 billion invested in 1,208 since 2010 (data from CB Insights) o Big Drivers o$100 billion annual cyber attack loss in US, GROWING oCybersecurity spending to INCREASE, from 4% to 7% of IT oMore innovative tools are needed! Top 7 Hot Areas 1. 2. 3. 4. 5. 6. 7. Behavior data analytics for anomaly Security payment and fraud Security for IoT NG identity & access control platform Inside threat monitoring & response Threat intelligence infrastructure Security ecosystem solution Strategy To Innovate oCreate what Chinese businesses need for their security defense, go to Latin America & Mideast with ease oCreate what US businesses need for their security defense, go to North America & Europe with ease oWatch development on Wassenaar Arrangement, to leverage global security research talents effectively