A new era of cyber startups spring from 'crowdfunding'

We live and work in a technology-intensive society and our reliance on technology grows each day. With the gradual improvement in economic conditions, we are beginning to see a resurgence in technology start-ups. Commercialization of advanced technology is creating new opportunities, and entrepreneurs are seizing these opportunities before the large tech-sector icons move in.

This trend is not like the tech start-up frenzy of the 1990s, when I was at Netscape. Venture capital start-up funding is much more difficult to obtain now, as venture capital firms have adopted a highly selective screening process. One reason for the increased scrutiny is the start-up rally we just went through in the social networking sector. A few social networking start-ups were acquired for hundreds of millions of dollars, with a couple getting $1 billion or more. This was an attractive return on investment.

While traditional funding sources might be limited, new sources of funding have emerged, the most notable being “crowdfunding.” This phenomenon occurs when a group of networked individuals uses online resources to pool their money so they can invest in the efforts of others to bring something new to the market. Crowdfunding portals are expected to raise $3 billion this year. This new funding source expands the start-up investor community significantly. Let’s face it; $3 billion is far from chump change.

A fair number of these new tech companies are focusing on cybersecurity. This is due in part to the nearly constant bombardment of new threats, along with a surge in public awareness of successful cyberattacks, thanks to increased media attention. Look at the information that just hit the mass media regarding “Operation Red October,” a cyber espionage campaign that was going on since 2007, and you get a sense of the risks that cybersecurity start-ups are working to mitigate.

Another factor driving the number of cybersecurity start-ups is that much of the advancement in cybersecurity in the past few years has been what I call “buffing and polishing”— incremental improvements. But based on recent conversations I have had, this is going to change shortly.

Yet another major factor driving this movement is the frequency and sophistication of cyberattacks. They are relentless, and the total overall cost of cyberattacks is growing by leaps and bounds. Now add to that the recent warnings by government, military and intelligence leaders about the likelihood of a sizeable and impactful cyberattack that is likely to take place shortly, and the justification for new products and services is evident. The need is there.

Albert Einstein is credited with saying, “The definition of insanity is doing the same thing over and over again and expecting different results.” That is basically what we have been doing in cybersecurity for years.

One of the hottest areas for cybersecurity start-ups addresses alternative connected devices and equipment; that is, tablets, smart phones, music players, as well as connected equipment such as home appliances, medical equipment and even smart cities. One report suggests that nearly 50 percent of everything connected to the Internet falls into the alternative device/equipment category. It is clear our dependence on Internet connectivity in virtually every aspect of our daily lives, as well as the federal government’s efforts to increase cybersecurity, makes the future for this start-up segment looks very bright.

What is new about many of these start-ups' approaches to cybersecurity is that they are proactive rather than reactive. They model inbound and outbound communications traffic from devices, use algorithms that are remotely updated, and score each source/destination as to the potential threat, depending on a preset threshold to take action on those deemed high-risk communications. Actions go from alerting the user before the communication is complete, all the way to out and out blocking the inbound or outbound communications.

Our future depends on innovation and start-ups are critical in that respect. Their imagination is what will create the world in which we live, work and play. That is why all of us should do what we can to support these risk takers.