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A Specter is Haunting the Silicon Valley


CYBER THOUGHTS NEWSLETTER

AUGUST 2023


A specter is haunting Silicon Valley — the specter of profitability. All the powers of FOMO investors paying insane prices for auction rounds have entered into a holy alliance to exorcize this specter: growth-at-all-costs advocates and 100X ARR believers, hype chasers, and no-diligence investors.


Where is the East Coast VC Fund that has yet to be decried as obsessed with profitability by its opponents in the Valley? Where is the fund that has not hurled back the branding reproach of being old-fashioned, against the more enthusiastic supporters of blitz scaling and SPAC offerings?


Two things result from this fact:

  1. Profitability is already acknowledged by all FOMO investors to be a threat to their speculative spree.

  2. It is high time that Advocates of Profitability should openly, in the face of the whole Valley, publish their views, their aims, their tendencies, and meet this nursery tale of the Specter of Profitability with a manifesto of the movement itself.

It is once again time to focus on the fundamentals: building great businesses that create value for consumers and profits for their founders and investors. It shouldn’t be radical, but here we are. AI is once again driving a momentum hype cycle that will likely end in tears.


And now for something completely different…


This year’s BlackHat conference felt like it was more than back to normal after the small crowds the past two years; it felt downright giant. Many attendees suggested that the show floor now feels like the industry behemoth RSA, but it has managed to keep much of its unique character.


As one might expect, AI was the buzzword that every company was talking about. There were a couple of booths that were clearly purchased before companies had hit the skids and laid off large portions of their workforce; it’s an awkward look and a lesson in sunk costs.


DEFCON, BlackHats rebellious “sibling” that is actually its parent, was the largest yet with an estimated 30,000 attendees. This has become a conference that is an on-ramp for newbies into cybersecurity; it looks a bit like Rock-the-vote for signing up the youth vote. Some of the old school was in attendance; the legendary hacker group The Cult of the Dead Cow threw a party for their 25th anniversary for example, but this has become a place where a younger generation can sample from many different hacking villages to see what suits them; in that, it is a bit like a career fair. While it may not be as edgy as it once was, it is fulfilling a valuable role in the security / hacking world, and we hope it continues to grow in both attendance and importance.


Below are a few of the articles that caught our attention this month. Moreover, we’ve inserted one or two sentences in italics, summarizing each article’s importance. We hope you enjoy and appreciate the material.

WHAT WE'RE READING

Here's a curated list of things we found interesting.


Nvidia Sales Surge as AI Boom Lifts Earnings

During many bubbles, the best way to make money is to sell the “picks and shovels to the miners.” In this current AI Boom, Nvidia has almost a monopoly on the chips needed to create the models.

Chip maker Nvidia said revenue in its recently completed quarter more than doubled from a year ago, setting a new company record, and projected that surging interest in artificial intelligence is propelling its business faster than expected.





Inside Countercloud: A Fully Autonomous AI Disinformation System

Disinformation is going to be a big topic over the next election cycle. This is a small scale experiment by a security researcher who has spoken at Black Hat and Defcon in the past. It’s a proof of concept that is disturbing.

It’s called CounterCloud: it’s totally autonomous, and it provides a glimpse into how AI and disinformation will work together in the future.


Oh, and it only cost $400.





Mobb Wins Black Hat Startup Spotlight Competition

This is the second annual Black Hat startup competition where our own Lucas Nelson was a judge. There was fierce competition for the top spot; and as expected each company was using AI in some way.

Vulnerability remediation startup Mobb won the Startup Spotlight competition at Black Hat USA 2023, beating out others focused on firmware security, cloud infrastructure security, and software security.




TRANSACTIONS

Deals that caught our eye.


Check Point buys Perimeter 81 for $490M to enhance its security tools for hybrid and remote workers

The acquisition comes amid a major funding crunch for startups, particularly those looking to raise larger growth rounds. Perimeter 81’s exit is coming at a big discount to its last valuation: It raised $100 million in June 2022 at a $1 billion valuation, according to PitchBook data.






PODCASTS

What we're listening to.

The Intelligence and National Security Foundation (INSF) is a 501(c)3 nonprofit organization dedicated to addressing contemporary intelligence and national security challenges, facilitating public discourse on the role and value of intelligence for our nation's security, and advancing the intelligence field as a career choice.


Intelligence & National Security Alliance - Plenary 2: View From The Hill

INSA and AFCEA hosted the 10th Intelligence & National Security Summit on July 13-14, 2023, at the Gaylord National Resort in National Harbor, MD.


INSA Chairwoman Letitia A. Long sat down with SSCI Chairman Sen. Mark Warner and SSCI Vice Chairman Sen. Marco Rubio for a wide-ranging discussion about key intelligence priorities. Both Senators agree on the importance of renewing FISA Section 702, with Sen. Rubio noting, that the U.S. should "stop being embarrassed about the fact that we spy". The conversation touched on how the pandemic and Russia/Ukraine war has strained the Defense Industrial Base. Both senators stressed the need to invest in AI to keep pace with our adversaries. Closing out the discussion, they spoke on the growing China threat and potential role Taiwan in future conflicts. Speakers:

- Senator Marco Rubio, Vice Chair, U.S. Senate Select Committee on Intelligence

- Senator Mark Warner, Chairman, U.S. Senate Select Committee on Intelligence

- Letitia A. Long, Chairwoman, INSA (moderator)



ABOUT LYTICAL

Lytical Ventures is a New York City-based venture firm investing in Enterprise Intelligence, comprising cybersecurity, data analytics, and artificial intelligence. Lytical’s professionals have decades of experience in direct investing generally and in Corporate Intelligence specifically.

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