Frankly Speaking - Almost all cybersecurity VCs are confused.

Luck doesn't equate to knowledge.

Disclaimer: Opinions expressed are solely my own and do not express the views or opinions of my employer or any other entities with which I am affiliated.

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LET’S BE FRANK

I’ve been getting feedback on my takes on how I think Crowdstrike and Zscaler might fail, and surprisingly (or unsurprisingly), most of it has been from VCs. I’ve heard a range of feedback telling me that I bring up interesting points to the fact that I’ve overestimated the power/influence of the developer and how executives make all the major technical decisions. However, I feel like the reasons for their arguments/objections are not strong. It’s frustrating because many of these VCs haven’t worked in an organization recently or even at all! With that said, I do think there are some thoughtful and talented cybersecurity VCs that have certain traits that help them navigate changing trends.

This week’s newsletter is not to criticize VCs or address the points they brought up to me. However, it’s exploring where the disconnect between me and them is. For context, I have a PhD in the intersection of distributed systems and cybersecurity. During my PhD, I started an incubator for early-stage cybersecurity startups and worked in VC for about 3.5 years investing in cybersecurity companies before going back into engineering. I don’t claim to know everything or all the answers, but I have seen both sides.

I’ve concluded that cybersecurity VCs are confused, but it’s not their fault. Changes are happening quickly in the industry, and it’s impossible to keep up.

What do cybersecurity VCs (or VCs in general) do?

Before diving into possible disconnects, we should talk about what VCs do. VCs’ primary job is to invest in startups that can lead to outsized returns, i.e. returns that are better than investing in the stock market and S&P 500. The top VCs regularly beat that benchmark.