Hi, I'm Tom Fields, senior vice president of editorial with information security media group. I'm talking today about cybersecurity investments in the COVID-19 marketplace in the pandemic. It's my pleasure. My privilege to be speaking with Alberto Japes, he is the co-founder and managing director of a four-point capital.
Alberto, thank you so much for taking time to join me today. So, thank you very much, and it's great to see you after the RSA conference. It's hard to believe that RSA was only three weeks ago. It seems like a decade ago in some ways, so much has changed.
You and I sat down at RSA and we talked about the health of the cybersecurity investment marketplace. How have your views on the marketplace changed over the past three weeks? Well, we're living in unprecedented times. I think the fear of the unknown is what brings a lot of uncertainty, but reality, I think the world is facing something that we still don't necessarily know the impact.
We see the impact on the financial markets and the stock market, and specifically to answer your question, I think we need to look at, first of all, how the financial markets have reacted to company valuations and specifically public company valuations, then how that changes the impact of private company valuations, and then also analyze a little bit of what's going on from the buyers of technology and buyers of cybersecurity, and also look at what's going on with the thread environment. So let me state the obvious. Valuations have been slashed by a third or more, and we've seen companies that have lost multiple hundreds of millions of market capitalization, or billions of dollars in the case of Apple in Amazon and so on, so there's a resetting in those public valuations are impacting private company valuations. So the major capital is oftentimes when we decide to make investments, we always will get public comparable.
So I would say valuations in the private market are also being adjusted very fast, and I say many of my fellow investors are maybe waiting to see added to rather than done in doing new investments. I think the funding environment is going to get a lot more tougher for entrepreneurs. Still, they'll be funding and they'll be great companies get billed during the recessionary times, but I would say valuations are going to normalize, let's just talk about it. But also, let's talk about the market readjustment of the public companies are impacting companies and their ability to invest.
So a lot of banks, a lot of financial institutions, a lot of travel, but the airlines, even though they have projects for new IT capabilities, digital transformation, they're looking very hard at the budgets, and they're trying to figure out what are the must have initiatives the technology is going to help them to be more efficient, but other things are going to get canceled. We're already seen in several of our portfolio companies, they're projecting certain level of attainment in sales that orders are being put on hold, companies that buyers are recent their budgets, and therefore it's going to get tough, so there's going to be a need to re-align the expectations of what is going to be the sales entertainment for a lot of the portfolio companies, and therefore what is the impact to cybersecurity, and there's the fourth area. So we talked about public company regulations, private company regulations, companies divide the implications of the impact and the ability to invest in technology is no longer what it was three weeks ago. And so on the other hand, what really makes cybersecurity unique is the fact that the trade actors are taking advantage of the pandemic and the confusion that it in crisis exists.
We seem, just remind you, first point capital is exclusively investing in cybersecurity. We have 19 portfolio companies soon to be 20 and 21, we have two companies from term sheet that we hope to go to the next 60 days, but out of that set we're seeing that the threat, the activity for ransomware, the activity for our business email compromise, the activity, the sophistication of attacks are going to increase, unfortunately, many of those attacks are going to help our organization to hospitals, because they know that if they don't have the systems operational, they won't be able to deal with the emergency, but it's really sad, because they have bigger priorities to saving lives, now they have to be able to figure out their computer systems are completely frozen, their operational capabilities have been in the back and tempered. Therefore, the attack vector is actually we see an increase in volume and sophistication of attacks. Therefore, we have a view at Forge point that cybersecurity will continue to be one of the most important investments in a newer order, because companies are going to have to fend off some of those increased volume and sophistication of attacks, but also, I just do a new reality, you and I are working from home, we just do in our office, what does it mean to work from home?
How are we accessing our network? How are we accessing our servers? We have to have our information. Somebody can be listening to what we have in our five networks and so on, so the infrastructure for remote collaboration, which may be a new reality and will be a new normal, I know many companies in our portfolio should describe the distributed work environments, but the reality is that now it's not going to be a nice to have you at least I must have, sorry for making a long perspective, I always like to leave you in context, it's not just a simple yes answer, but I think there's huge implications on the market right now in what it means to cybersecurity, in what it means to companies that have lost market capitalizations in their ability to invest.
Berta, we aren't living in soundbite times, and as you say, it's got to be the largest remote workforce we have ever seen that's not going to end anytime soon, so we've created the biggest attack surface that the adversary community has ever seen. Yes, and we're all trying to adjust to that new reality because we're trying to try to conduct business as usual, but you know, how do you keep an engagement, an enable engagement with customers, and how do you keep the meaningful engagement with your teams, because now we're all remote and we don't have the benefit to work with somebody else's office, as a team we have instituted the stand-ups in house three times a week, because we need to know that people are okay, their well-being is important for us, but at the same time they weren't working all these issues, and that's a huge momentum, and we're very fortunate and lucky, everybody is healthy, everybody is productive, but at the same time as you recall when we talked about three weeks ago, we had just announced that we had just closed our latest fund, which was a $450 million fund, exclusively invested in cyber security, you know, you'd be better and lucky than good, our timing was perfect, so we're in the market looking for innovative companies and trying to invest to make sure we create the next generation of leaders in the market. In recessionary times, you see new companies emerge because they become more efficient, more nimble, refocus on what matters, which is the customer, and I think we're going to see great companies emerge out of this crisis. Alberto, what are the trends you're going to pay most attention to as the crisis unfolds over the next weeks and even months?
You know, when we talked three weeks ago, I was telling you that, you know, we talked about the cybersecurity market and how all these different sectors and segments are growing or becoming important, but, you know, I said there's a parallel universe emerging, which is a cyber intelligence market, which is not a sub-service security, it's actually a parallel universe, because while cyber security cares about devices, applications, IP addresses, certain data or servers, cyber intelligence is about people, about companies, about brands, about, you know, intellectual property. And I think the biggest trend that we're going to monitor is the activity in not only in the broad social web and the broad surface web and see what's going on, what are the nutrients that are emerging. You know, it's still the number one issue in cyber attacks is, you know, phishing. Business email compromise, people, the bad actors are using artificial intelligence and machine learning to get more sophisticated about trying to be more effective in attacking you, not just phishing, but spear phishing, targeting from targeting Alberto and see how they portray the ones that are supposed to be individually trying to take over somebody's account.
And when you think you're dealing with a customer or supplier, they'll be trying to final money to the different accounts and so on and in unexpected users will click in the wrong URLs and open the wrong attachments and they're going to get compromised. And they won't see the immediate effect, but some people will see ransomware. So we're really monitoring that end user will always say that the biggest weak link is the human firewall. I think we as individuals are the biggest targets, you know, networks and devices and all the sensors that we put in may detect things, but as individuals sometimes we do think that we think they're right and we are the ones that we compromised.
So we're going to see just what are the new types of attacks, what are the new attack vectors and really try to figure out how we could collectively, now we're existing portfolio with finding for those new companies that are really addressing these four issues and try to see how we can do it more effective. And that's it as well. Being the liver in a way that is easy to consume, the days of the high-touch selling and the fact that I need to go set up my server and take two, three, four weeks to get approval accounts or approval value are pretty much gone. I think we need to figure out entrepreneurs need to build products that are easy to consume, easy to deploy, easy to implement.
And therefore thinking always as a user center, as a user is a center of design of what they do. So I think we're going to look for those signals on the attack vectors, but also how we can identify not only this new innovative companies and try to be part of the journey by being investors by the same time influencing our existing portfolio companies to maybe begin instead of adding new features, making the products easy to consume, easy to deploy, and deliver us the service. So given how the world has changed over the past three weeks, presumably that's the advice you're given to your portfolio companies now? Yeah, you know, it's interesting, you know, I was an entrepreneur before I became an investor.
I run three different cybersecurity companies. And you know, you need to realign your expectations, be pragmatic and see what's really happening in-house with impacting your ability to generate revenues and sales, and therefore you need to realign your spend structure. You also need to focus on your employees because without them and without their wellbeing, you won't be able to create value. How do you make them productive?
How do you make sure that they're not worried about their wellbeing so they can take care of their families when they're the same time created, tremendous value for you? But at the end of the day, businesses are about customers. Business is about successful businesses are about happy customers. So really emphasize to our portfolio companies in New Jersey, England, that they really need to focus on the customer and the value they provide.
Without customers, there's no business, and we're going to unfortunately see that some companies will not be able to convince customers or to have the success of the customer in the United Society as lucky and as successful as they thought they were going to be. So really focus on customer success, and you know, in the time of renewal, they will remember who was next to them, who helped them through the crisis, and they're going to renew products with people that really focus on customer success. As you know, it's easier to sell to an existing customer than a new customer. The other thing that we're recommending entrepreneurs is that don't assume there may be some, they also were raising some statistics about reduction in force of being implemented in industries, but people, companies are not going to have enough resources.
We always talk about the shortest of qualified cybersecurity professionals, but I think the companies are going to have to take own to the fact that it's not just about selling that technology and then the customer figure out how to use it. It has to be a services-led engagement. We need to provide the ability, the capability, the qualified resources for people to implement their solutions, to augment and complement their existing teams, because they're going to have less people, they're being asked to do more with less, and they're looking for suppliers that are really going to have, not only do I have this product or value, but I have the ability to help you and bring people, their experts to help you do that in an idea, we hope you promote your management. So we'll see in pre-demand of, you know, security, management services that people will respect and trust suppliers.
I think companies that have, well, they are prepared to deliver as a service would have a lot of success. That's it. We are assessing sales and marketing priorities, you know, instead of attending events and so on, we're going to have to do more work through social media to figure out how you reach and create more meaningful content videos, workshops, learnings, sharing communities, building communities, learn a lot from the open-source world where communities help each other and drive. And as well, in some people say, well, you should cut your research and development.
It's not a country you should invest, because there would be competitors that perhaps establish companies, public companies, one time have a discretionary spend to put into R&D. Now, you're going to be able to be ahead, because if you have the differentiation, and since people are not buying, and the big players are unable to invest in innovation, you're going to get ahead. So I would say the areas to invest are in R&D and differentiation and customer success and realign your expenses and your way of doing business. And that's it.
And since we have met and we're continuing to meet with all our portfolio companies and trying to help them to adjust to a new reality and see how we can help them. And we're also encouraging to share among the 19 portfolio companies and the 19 CMOs, the 19 BPO marketing is talking to each other and saying, these work for me, these didn't work for me. And they're trying to bring together their resources so that they can, they can try to leverage their ways that they can reach the customer, they can reach the customer, they're successful. Alberto, we talked a lot about the customers.
What's your message to the customers of these security products and services? The customers are discerning, and they are looking for partners. And I think first and foremost, you need to look for companies that are willing to work with you, make you successful, and don't look at the near-term benefit, even your constrained resources. So there's lots of companies out there, nimble companies, not the established brands that you may have in the past worked with, they're more willing to work closely with you to help you bring value, to help, you help them build their new, the new capability in photo roadmaps, that you become a design partner.
So I would say, trust the fact that the innovation economy is alive and well, and given the cycles of innovation, you will see new companies emerge as leaders in their venture funds like Workpoint Capital that will support them to their logical life cycle and just give them a chance. Alberto, there are three legs to this tool. There are the entrepreneurs you talked about the customers and there are the investors. What's your message to the investors that supports your efforts?
My coin investors and investors in my fund, right? For my coin investors, look, I'm very lucky to work with tremendous groups and we see eye to eye and, you know, we need to try to support our companies in our time. I know we have to make some hard decisions, but I guess support and make sure that don't lose, don't be just too short, trimming it. There's a big opportunity to, or they stay out later, where we show that commitment to our existing portfolio companies.
For the investors in funds, which I think that was the question you were asking, neither partners have a full portfolio for working best. Typically, they invest in hard assets like real estate and public equities, you know, like this market, which is probably one of the areas that they're not very happy with and perhaps it's going to be hard to see when it's going to recover and they have mutual funds. But there's these private equity, the ability to invest, and many of them to have a very diversified portfolio, I would venture to say that your private equity investment is probably the one that is probably going to be the one that is going to demonstrate that it's going to probably make greater returns as we get out of the crisis. Venture capital is, I think, the US, if we step back and look in the big picture in the global economy, the US is exporting innovation.
And one thing that's different about the US is that it's venture community and venture, and the cycle system around it, it's not just venture capital, it's the lawyers, the account and the auditors and all that and the entrepreneurs and academic institutions and government, all working in this innovation economy. So I would say this is a great time to part your money in venture capital funds. They're specifically focused on the specific areas, they're demonstrating success, and they'll probably provide, you know, outside returns, even, you know, even the like, like, life cycle soficurems. Better, we're living in times that neither of us has ever seen before.
What gives you optimism? You know, we reflected, and we lived through some of the challenges we have in the 1980s in the year 2000, where the drop on bubble shortly after 9-11, we thought we were recovering when down again in 2008, again, with the whole financial crisis. What these we hope is the fact that great companies were built during those times. What gives me hope about cybersecurity, we, one of the questions we had to answer to our limited partners when they were doing the diligence and forcepoint and also cybersecurity, we showed that there was not a high degree of correlation that the effect that the market had on cybersecurity software, actually, we had some of the statistics that out there in the US economy started in the mid-2000s, did not have an appreciable effect in the security software market, which grew 25% to 3.3 billion in the year 2000, up to 22% in 1999.
Furthermore, if you say, so there's this hope, I was trying to tell you that there's sectors of the economy that are going to be pillars for success and support, and I believe that there are going to be key areas of investment in cybersecurity happens to be one of those, because the threat vector and the sophistication of cyber attacks in nation states are only going to increase. And companies that protect their customers, their customers, their suppliers, and please take them seriously and proactively see who straight-attracting they are going to do well. So, my message is that we've seen these before, there's an end, there's cycles, and I think great leaders are going to emerge after we go through these, but I'm, you know, I'm representing a lot of people that are lucky if we are calm, and I hope they're dealing with what we have, and we need to be responsible for what's happening to them. Very well, Seth.
Alberto, as always, I appreciate your time. I appreciate your insight. Thank you so much for spending time with me today. Tom, it's always a pleasure.
Thank you very much. Again, I'm speaking with Alberto Jepes, he is the co-founder and managing director with four-point capital. For information security media group, I'm Tom Field. Thank you very much.