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Source: jaydeep, WikiCommons

Protocol Index: Cybersecurity startup opportunities

Protocol Index

Good morning! This Monday, what one cybersecurity VC is looking for, WeWork-backed mortgage securities are tanking, and what the Fed learned from analyzing conference call transcripts. Want Index in your inbox each morning? Subscribe here.

What Matters This Week

  • It's a quieter earnings schedule, but there are still a few big names to report. Sony reports Tuesday, and Cisco reports on Wednesday alongside Tencent. That's one of two looks we'll get at the Chinese tech ecosystem this week, with reporting on Friday. On Thursday, Applied Materials, which makes chip-manufacturing equipment, will hint at how investment in that space is holding up.
  • Economic data is also light, with Friday's retail sales report for April the main highlight. Watch the "nonstore retailers" line closely; it will give an indication of how ecommerce fared in April.
  • Fed Chair Jerome Powell speaks Wednesday on "current economic issues." Deutsche Bank analysts think the focus will be on negative interest rates and how the Fed plans to avoid them. If negative rates do become policy, expect to see banks' tech spending drop — just as Wall Street prepares to move to the cloud.

Layoff Watch


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Today's News

As of 4:40 a.m. PDT: Nasdaq Futures: -0.50% | Euro 600: -0.71% | Nikkei: 1.05% | Hang Seng: 1.53%


  • The U.S. government is reportedly talking to Intel and TSMC about building commercial chip foundries in America. It also reportedly wants to help Samsung expand its U.S. presence.
  • Latin American grocery delivery Cornershop launched in the U.S. Uber's acquisition of the company, announced last year, is awaiting regulatory approval.
  • Kingsoft Cloud shares jumped 40% on its first day of trading. It raised $510 million in its IPO.
  • Ericsson said it now expects 2.8 billion 5G subscribers by 2025, versus the 2.6 billion it previously forecast.
  • Toshiba said coronavirus had "only a limited impact" on its results for last quarter, though it trimmed its operating profit estimate by around $90 million.
  • India's smartphone market grew 1.5% year-on-year last quarter, compared to a 16% drop in the U.S. and a 20% drop in China.


  • WeWork's financial difficulties are hitting the prices of $5.5 billion worth of commercial mortgage-backed securities.
  • The EU is reportedly paying $650,000 for researchers to examine anticompetitive practices among Big Tech.
  • Elon Musk said Tesla's HQ will leave California and that the company would sue Alameda County for preventing its factory there from reopening.
  • Tesla Model 3 sales in China were down 64% month-on-month in April, despite a 9.8% rise in overall electric vehicle sales.


  • Vroom reportedly filed for an IPO, which it plans for June.
  • Saudi Arabia's Public Investment Fund and General Atlantic are both reportedly considering a stake in Jio Platforms. General Atlantic could invest up to $950 million.
  • Corporate housing startup Zeus reportedly raised $15 million at a $110 million valuation — around half its previous valuation. Bloomberg reports that Zeus raised the cash to comply with a loan covenant.
  • Morgan Stanley and other lenders reportedly had to use $1 billion of their own money to fund Cornerstone OnDemand's Saba Software acquisition.
  • Tesla got a loan worth up to $565 million for its Shanghai factory from Industrial and Commercial Bank of China.


What's going on with cyber startups?

It's pretty obvious at this point that cybersecurity is having a moment: With millions of us forcibly moved to insecure networks, that was inevitable. But what's really interesting is what all this is doing to the cybersecurity startup scene. I recently spoke to John Funge, chief product officer at DataTribe, to find out exactly what's happening there.

  • DataTribe is a VC/studio hybrid: It invests around $2 million in seed stage companies and then gives them tons of hands-on help. Based round the corner from the NSA headquarters, it's focused on using that local talent to make great cyber startups.
  • Funge thinks the early stage market will be "softer" for a while, thanks to the macroeconomic environment. "VCs will start making investments again in a quarter or two," he told me, but valuations will drop 25-50%. Investors will also start with less-risky, later-stage investments, he thinks, before eventually building up their risk tolerance again.
  • But "really high-quality founding teams and companies are still going to prevail," he says. Indeed, DataTribe just closed a seed investment in BlackCloak, a startup that provides a "cybersecurity concierge" platform for high net-worth individuals and executives.

The pandemic has made DataTribe rethink its investments. For one, it's looking at startups' sales cycles: Ones that are less reliant on in-person sales are more attractive amid the disruption, Funge thinks.

  • And like everyone, Funge is "looking at remote work broadly as an area of cyber risk." Companies are still spending on cyber, he said, because for many companies it's "really non-discretionary, and it's a critical thing that the investment needs to continue in."

As for what DataTribe's looking for? Funge thinks there's a trend toward dashboards, to help CISOs cope with their "very fragmented cybersecurity." Tools that will help CISOs present cyber risk to other executives in "a way that is understandable" — e.g. dollars and cents — could be increasingly valuable as cyber risk becomes more prominent.

  • And Funge is also interested in tools that offer "better, more robust security at home." It's really hard to make a secure home network, he says, and there's a huge opportunity for tools that can help normal people deal with that.


  • "This obviously will sound super ballsy/arrogant, but we potentially have an opportunity to build a FedEx in the space of a few months." — Yandex COO Greg Abovsky told the Financial Times that the company has seen a huge increase in delivery demand.
  • "We are still finding most of these tech names to be offering 15% and 25% annualized expected return on a five-year view." — JPMorgan's Mark Davids thinks Asian tech stocks are still attractive, partly thanks to the coronavirus crisis accelerating digital transformation trends.
  • "As the immediacy of the crises seems to be easing, investor conversations have begun to turn to consolidation." — Citi analyst Joanne Wuensch thinks medtech deals are on the horizon.
  • "If CartaX wins, in 10 years there won't be a NYSE or a Nasdaq." — Carta CEO Henry Ward plans to launch a platform for private share trading this summer.
  • "The risks to the automotive sector are very, very large unless they secure their raw materials supply chain." — Sam Riggall, CEO of mine developer Clean TeQ, thinks electric vehicle manufacturers will need to invest in mines to avoid metal shortages.
  • "Without action, hundreds of our brightest startups will likely not survive this economic crisis." — 32 U.K. tech chief execs asked the government to expand emergency startup funding to companies that participated in U.S. accelerators.
  • "Underrepresented founders are used to thinking about risk in an intelligent way … They are constantly thinking about ways to protect themselves from worst-case scenarios." — SoGal Ventures' Elizabeth Galbut thinks founders used to being capital efficient could thrive during the downturn, though data shows fundraising is getting even harder for women.

Closing Bell

Executives are scared

Earnings reports are a lagging indicator — they tell you what's already happened, not what's happening. And with so many companies withdrawing guidance for the current and future quarters, it's become harder than ever to tell what's really going on. Fortunately, we have tech!

Federal Reserve researchers used machine reading to analyze 2,500 companies' earnings call transcripts to try to get a sense of the mood. They found that executives are much more worried than they were in the last recession: 42% of companies talked about cutting investment last month, compared to 25% in the first quarter of 2009. Credit line drawdowns, meanwhile, are being discussed more than twice as much as they were in 2008. The researchers said "financial concerns did not return to normal" for 12 months after the last crisis began — so don't expect those depressing conference calls to go away anytime soon.

Thoughts/feedback/tips? Email me — — or anonymously contact Protocol. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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