The CrowdStrike mess helps explain why VCs are pumping money into cybersecurity startups

Top News

• CrowdStrike bricks the world: Cybersecurity giant CrowdStrike caused global chaos today after an update bricked Windows machines around the world. Airlines, hospitals, and other businesses are on lockdown until they can get their machines fixed. That will take time. Shares of CrowdStrike are off today, but if the company wanted the world to know how much of the global economy depends on its technology, well, mission accomplished.

• Netflix shows consumer subscriptions have room to run: Netflix added more paid subscribers in the second quarter than expected and raised the lower end of its revenue guidance. Shares of the streaming company are up modestly today. The earnings report, while not enough to ignite Netflix’s value, shows that consumers are still willing to shell out for increasingly pricey digital subscriptions, which, we reckon, bodes well for startups that sell to folks instead of companies.

• The AI price war comes home: OpenAI has released a GPT-4o mini, a smaller version of its current GPT-4o model that you have probably tested. The price matters more than the model itself, which OpenAI says is “an order of magnitude more affordable than previous frontier models and more than 60% cheaper than GPT-3.5 Turbo.” Recall that Chinese AI companies have already shown how quickly AI prices can fall; perhaps we’re about to see the same domestically.

TWiST500

Speaking of cybersecurity, we’re gearing up for more TWiST500 work on the podcast next week, which means that we’re trawling through reams of startups to pick the next genre and individual names to debate.

Before CrowdStrike became a household name today, I was hoping to add some more cybersecurity names to the list in the coming weeks. We’ll move that timeline up.

The timing is perfect. Venture investors are spending more on cyber dealmaking, it turns out. Crunchbase News reports that in Q2 2024, VCs invested $4.4 billion into cybersecurity startups. That’s 63% more than what was recorded in Q1 2024, and 144% more than what the year-ago quarter managed.

Looking across a two-quarter timeframe, Crunchbase data indicate that $7.1 billion has been invested into cybersecurity startups through the second quarter of 2024, up 51% compared to H1 2023. Why? Demand. CrowdStrike is amongst the fastest-growing software companies on the public markets today, because the market needs what it has on offer.

Mix in the massive, expected Google-Wiz deal and cybersecurity is both the center of chatter today — thanks, CrowdStrike! — and a rising nexus of venture dealmaking, we’ll get to the category soon.

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This Week in Startups

E1982: Jason was joined on TWiST by True Anomaly’s Even Rogers this week. True Anomaly builds satellites and software to run them, focused on getting close to other satellites. Why does that matter? Defense applications, for one. The pair dug into defense contracts, national security, and even China-Taiwan tensions. If you are into space, startups, and security, this one is for you.

E1981: Liquidity is back! David Weisburd and Jason Calacanis had Jamie Rhode (Screendoor), and Matthew Mulvey (Liquid 2 Ventures) on to chat about the potential Google-Wiz deal and the importance of cash returns in venture, how emerging managers and secondary markets impact VC today, and why LP focus on larger funds could make it harder for smaller, younger funds to stay afloat.

E1980: A news roundtable after a historic weekend. Jason and Alex talked social media in the wake of a weekend of political violence, what some venture folks hope to get out of a second Trump administration, the Google-Wiz deal, and how Sequoia is working to cash out some of its LPs who are sitting on Stripe equity that they cannot sell.

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