Cyber Investing in The Nation’s Capital

Aaron Applbaum, Director of Investments

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Much ink has been spilled detailing why Israel has blossomed into a premier hub for cybersecurity investing. However, an essential element to Israel’s success that often gets overlooked, likely for its simplicity, is Israel’s condensed geographic proximity. All of the key components that make the investing ecosystem run, are very physically close together.  The coders of the technical products are in the same small vicinity as the military personnel (Israel’s famed 8200 unit) who interact with the adversary. The early-adopting commercial customers, are right alongside the educational institutions which, in turn, are next door to the money needed to make the whole thing run.

The location in the United States that mirrors this phenomenon most closely is the greater Washington DC area. The National Security Agency, the Federal government, pockets of “smart money,” numerous universities, and both government and financial purchasers of these technology products live within a very tight radius.

DC is a long way from being a hub for venture capital activity, though there are some early adopters of this mindset. A number of incubators have sprung up that look to take advantage of the proximity.  Mach37 and Allegis Capital’s Datatribe  stand as prominent examples of attempt to build the tech incubation found in Be’er Sheba across the Greater Washington DC Metropolitan Area.  Aaron Gregg’s recent Washington Post article highlights the beginning of what promises to be a long term trend of non-DC investment firms filling their cybersecurity portfolios with DC based companies

In the spirit of condensing and simplifying the ecosystem further, Strategic Cyber Ventures maintains the thesis that those who were purchasers and implementers of cyber technology will make good investors into the future of the cyber industry.  Those who fought the adversary on the front lines will make good founders of next-generation appliances. DC has the various apparatuses needed to bolster the environment that will allow for an algae bloom of successful cyber exits.   For DC to realize its full potential it will require a call to arms for the individuals that comprise the ecosystem.  The highly-focused military men of the 8200 unit go to the private sector in droves attempting to commercialize their experience and know-how.  DC will need the help of the warriors at the NSA and similar cybersecurity guardians in both public and private sector to build a more cyber-secure world.  The money has started to pour in, and more will follow.

In an industry that is so dynamic, with products that need to change faster than they are built—investments in cybersecurity companies are investments in the leadership teams and product roadmaps more than investment in what exists on day one of the investment.  Those best poised to build-up and invest-in companies correctly will be those who have had the challenge of keeping up with the adversary in real time.  The more our operators and implementers join the battle on the commercial side, the more hardened our attack surface will be and the more prosperity can come to our nation’s capital.