>> Narrator: Live from Nassau in the Bahamas. It's The Cube! Covering PolyCon 18. Brought to you by PolyMath. >> Welcome back everyone, we're live here in the Bahamas with The Cube's exclusive coverage of PolyCon 18, I'm John Furrier with my co-host Dave Vellante, both co-founders of SiliconANGLE. We start our coverage of the crypto-currency ICO, blockchain, decentralized world internet that it is becoming. It's the beginning of our tour, 2018. Our next guest is Hartej Sawhney who's the advisor at Pink Sky Capital, but also the co-founder of Hosho.io. Welcome to The Cube. >> Thank you so much. >> Hey thanks for coming on. Thanks for coming on. >> Thanks guys. >> We had a great chat last night, and you do some real good work. You're one of the smartest guys in the business. Got a great reputation. A lot of good stuff going on. So, take a minute to talk about who you are, what you're working on, what you're doing, and the projects you're involved in. >> So first of all, thank you so much for having me, it's really exciting to see the progress of high-quality content being created in the space. So my name is Hartej Sawhney. We have a team based in Las Vegas. I've been based in Las Vegas for about five years. But I was born and raised in central New Jersey, in Princeton. And my co-founder is Yo Sup Quan. We started this company about seven months ago and my co-founder's background was he's the co-founder of Coin Sighter in Exchange out of New York, which exited to Kraken. After that he started Launch Key which exited to Iovation. And prior to this company, my previous company was Zuldi, Z-U-L-D-I .com where we had a mobile point of sale system specifically for high volume food and beverage companies and businesses. So we were focused on Fintech and mobile point of sale and payment processing. So both of us have a unique background in both Fintech and cyber-security and my co-founder Yo, he's a managing partner of a crypto hedge fund named Pink Sky Capital. And he was doing diligence for Pink Sky, and he realized that the quality of the smart contracts he was seeing for deals that he wanted to participate as an investor in, and I'm an advisor in that hedge fund, we both realized that essentially the quality of these smart contracts is extremely low. And that there was nobody in this space that we saw laser focused on just blockchain security. And all the solutions that would be entailed in there. And so we began focusing on just auditing smart contracts, doing a line-by-line code review of each smart contract that's written, conducting a GAS analysis, and conducting a static analysis, making sure that the smart contract does what the white paper says, and then putting a seal of approval on that smart contract to mitigate risk. So that the code has not been changed once we've done an analysis of it, that there's no security vulnerabilities in this code, and that we can mitigate the risks for exchanges and for investors that someone has done a thorough code analysis of this. That there's no chance that this is going to be hacked, that money won't be stolen, money won't be lost, and that there's no chance of a security vulnerability on this. And we put our company's name and reputation on this. >> And what was the problem that is the alternative to that? Was there just poorly written code? Was it updated code? Was it gas was too expensive? They were doing off-chain transactions. I mean what are some of the dynamics that lead you guys down this path? I mean this makes sense. You're kind of underwriting the code, or you're ensuring it or I don't know what you call it, but essentially verifying it. What was the problem? And what were some of the use cases of problems? >> I would say that the underlying problem today in this whole industry, of the blockchain space, is that the most commonly found blockchain is Ethereum. The language behind Ethereum is called Solidity. Solidity is a brand new software language that very few people in the world are sufficient programmers in Solidity. On top of that, Solidity is updated, as a language on a weekly basis. So there are a very limited number of engineers in the world who are full-stack engineers, that have studied and understand Solidity, that have a security background, and have a QA mindset. Everything that I just said does exist on this Earth today and if it does, there's a chance that that person has made too much money to want to get out of bed. Because Ethereum's price has gone up. So the quality of smart contracts that we're seeing being written by even development shops, the developers building them are actually not full-stack engineers, they're web developers who have learned the language Solidity and so thus we believe that the quality of the code has been significantly low. We're finding lots of critical vulnerabilities. In fact, 100% of the time that Hosho has audited code for a smart contract, we have found at least a couple of vulnerabilities. Even as a second or the third auditor after other companies conduct an audit, we always find a vulnerability. >> And is it correct that Solidity is much more easy to work with than say, Bitcoin scripting language, so you can do a lot more with it, so you're getting a lot more, I don't want to say rogue code, but maybe that's what it is. Is that right? Is that the nature of the theory? >> Compared to Bitcoin script, yes. But compared to JavaScript, no. Because Fortune 500 companies have rooms full of Java engineers, Java developers. And now the newer blockchains are being written, are being written on in block JavaScript, right? So you have IBM's Hyperledger program, you have EOS, you have ICX, Cardano, Stellar, Waves, Neo, there's so many new projects that are coming, that all of them are flexing about the same thing. Including Rootstock, RSK. RSK is a project where they're allowing smart contracts to be tied to the Bitcoin blockchain for the first time ever. Right, so Fortune 500 companies may take advantage of the fact that they have Java developers to take advantage of already, that already work for them, who could easily write to a new blockchain, and possibly these new blockchains are more enterprise grade and able to take more institutional capital. But only time will tell. And us as the auditor, we want to see more code from these newer blockchains, and we want to see more developers actually put in commits. Because it's what matters the most, is where are the developers putting in commits and right now maximum developers are on the Ethereum blockchain. >> Is that, the numbers I mean. Just take a step there. So the theory of blockchain. Percentage of developers vis-a-vis other platforms percentages-- >> By far the most is on developed on Ethereum. >> And in terms of code, obviously the efficiencies that are not yet realized, 'cause there's not enough cycles of coding going on, it's evolution, right? >> Yes. >> Seems to be the problem, wouldn't you say? So a combination of full-stack developer requirements, >> Yes. >> To people who aren't proficient in all levels of the stack. >> Yes. >> Just are inefficient in the coding. It's not a ding on the developers, it's just they're writing code and they miss something, right? Or maybe they're not sufficient in the language-- >> It's a new language. The functions are being updated on a weekly basis, so sometimes you copied and pasted a part of another contract, that came from a very sophisticated project, so they'll say to us, well we copied and pasted this portion from EOS, so it should be great. But what that's leading to is either A, they're using a function that's now outdated, or B, by copying and pasting someone else's code from their smart contract, this smart contract is no longer doing what you intended it to do. >> So now Hartej, how much of your capability is human versus machine? >> Yeah I was going to ask that. >> ML, AI type stuff? >> So we're increasingly becoming automated, but because of the over, there's so much demand in the space. And we've had so much demand to consistently conduct audits, it's tough to pull my engineers away from conducting an audit to work on the tooling to automate the audit, right? And so we are building a lot of proprietary tooling to speed up the process, to automate conducting a GAS analysis, where we make sure you're not clogging up the blockchain by using too much GAS. Static analysis, we're trying to automate that as fast as possible. But what's a bit more difficult to automate, at least right now, is when we have a qualified full-stack engineer read the white paper or the source of truth and make sure the smart contract actually does it, that is, it's a bit longer tail where you're leveraging machine learning and AI to make that fully automated. (talking over each other) >> But maybe is that, I'm sorry John. Is that the long term model or do you think you can actually, I mean there's people that say augmented intelligence is going to be a combination of humans and machines, what do you think? >> I think it's going to be a combination for a long time. Every single day that we audit code, our process gets faster and faster and faster because once we find a vulnerability, finding that same vulnerability next time will be faster and easier and faster and easier. And so as time goes on, we see it as, since the bundle of our work today is ICOs, token generation events, there are ERC 20 tokens on the Ethereum blockchain. And we don't know how long this party will last. Like maybe in a couple years or a couple months, we have a big twist in the ICO space that the numbers will drastically go down. The long tail of Hosho's business for us, is to keep track of people writing smart contracts, period. But we think they are going to become more functional smart contracts where the entire business is on a smart contract and they've cut out sophisticated middle men. Right and it may be less ICOs, and in those cases I mean, if you're a publicly traded company, and you're going from R&D phase where you wrote a smart contract and now actually going to deploy it, I think the publicly traded company's going to do three to five audits. They're going to do multiple audits and take security as a very major concern. And in the space today, security is not being discussed nearly as much as it should. We have the best hedge funds cutting checks into companies, before the smart contract is even written, let alone audited. And so we're trying to partner with all the biggest hedge funds and tell the hedge funds to mandate that if you cut a check into a company that is going to do a token generation event, that they need to guarantee that they're going to at least value security, both in-house for the company and for the smart contract that's going to be written. >> How much do you charge for this? I mean just ballpark. Is it a range of purchase price, sales price? What's the average engagement go for, is it on a scope of work? Statement of work? Or is it license? I mean how does it work? >> So first it depends is it a penetration test of the website or the exchange? Penetration testing of exchanges are far more complex than just a website. Or if it's a smart contract audit, is it an ICO or is it a functional smart contract? In either case for the smart contract audit, we have to build a long set of custom tooling to attack each and every smart contract. So it's definitely very case-by-case. But a ballpark that we could maybe give is somewhere around the lines of 10 to 15 thousand dollars per 100 lines of functional code. And we ask for about three weeks of lead time for both a smart contract audit and a penetration test. And surprisingly in this space, some of the highest caliber companies and high caliber projects with the best teams, are coming to us far too late to get a security audit and a penetration test. So after months of fundraising and a private pre-sale and another pre-sale, and going and throwing parties and events and conferences to increase the excitement for participating in their token sale, what we think is the most important part, the security audit for a smart contract is left to the last week before your ICO. And a ridiculous number of companies are coming to us within seven days of the token sale, >> John: Scrambling. >> Scrambling, and we're saying but we've seen you at seven conferences, I think that we need to delay your ICO by two or three weeks. We can assure you that all of your investors will say thank you for valuing security, because this is irreversible. Once this goes live and the smart contract is deployed. >> Horse is out of the barn. >> It's irreversible. >> Right right. >> And once we seal the code, no one should touch it. >> It's always the case with security, it's bolted on at the last minute. >> It's like back road recovery too, oh we'll just back it up. It's an architectural decision we should have made that months ago. So question for you, the smart contract, because again I'm just getting my wires crossed, 'cause there's levels of smart contracts. So if we, hypothetical ICO or we're doing smart contracts for our audience that's going to come out soon. But see that's more transactional. There's security token sales, >> Yes. >> That are essentially, can be ERC 20 tokens, and that's not huge numbers. It could be big, but not massive. Not a lot transaction costs. That's a contract, right? That's a smart contract? >> People are writing smart contracts to conduct a token generational event, most commonly for an ERC 20 token, that's correct. >> Okay so that's the big, I call that the big enchilada. That's the big-- >> Right now that is the most important, the most common. >> Okay so as you go in the future, I can envision a day where in our community, people going to be doing smart contracts peer-to-peer. >> Sure. >> How does that work? Is that a boiler plate? Is is audited, then it's going to be audited every time? Do the smart contracts get smaller? I mean what's your vision on that? Because we are envisioning a day where people in our audience will say hey Hartej, let's do a white paper together, let's write it together, have a handshake, do a smart contract click, click. Lock it in. And charge a dollar a download, get a million downloads, we split it. >> I envision a day where you can have a more drag and drop smart contract and not need a technical developer to be a full-stack engineer to have to write your smart contract. Yes I totally envision that day. >> John: But that's not today. >> We are very far from that today. >> Dave, kill that project. >> We're so far, we're very far from that. We're light years far from that. >> Okay well look. If we can't eliminate the full-stack engineers, I'm okay with that. Can we eliminate the lawyers? At least minimize them. >> We can minimize them possibly, but we have five stacks of lawyers for our company, I don't see them going anywhere. We need lawyers all the time. >> I see that in the press sometimes, yeah it's going to get disrupted. I don't see it happening. Okay we were having a great conversation off-camera about what makes a good ICO. You see, you have a huge observation space. And you were very opinionated. A lot of companies are out there just floating a token because they're trying to raise money. And they could do the same thing with Ethereum or Bitcoin. >> That's correct. >> Your thoughts? >> My thoughts are that it's very important for companies who are sophisticated, I think, to start by giving away a little bit of equity in the business. And that if you want to be in the blockchain space, and you really firmly believe you have a model to have a token within a decentralized application, I would still start by finding quality investors in the space, in the world. They might be still in Silicon Valley. Silicon Valley didn't just disappear overnight now that the blockchain is out. I am all for the fact that Silicon Valley no longer has as much of a grip on tech because of their blockchain world. And they're not seeing as much deal flow, and there's not as much reliance on venture capitalists, that's exciting to me. But let's not forget the value, that top-tier VCs like Andreessen Horowitz and Vinod Khosla. and Fintech VCs like Commerce Ventures and Nyca Partners in New York, Propel VC, these are good Fintech VC arms that continue to time and time again add immense value to companies. >> And they have networks. They add value. >> They have strong-valued networks, but they're just not going to disappear. And those VCs, if they've invested into a company, took a board seat, fostered their growth, taught them what it means to actually be a real business that's growing at 7-15% week over week, maybe two years down the line, after they've given away a board seat to someone like Nyca Partners, I would be interested in understanding what your token economics look like. Now that you have a revenue generating business, how you've placed a token model into this already running business that makes 25 to 50 grand a month and you have a team of 10, self-sustaining themselves off of revenue. Much more intriguing of a conversation. What's happening today in the space is, hey my buddy Jim and Steve and I came up with an idea for this business. There's going to be a token, and we're starting a private pre-sale tomorrow. I'm going to give you 300% bonus and will you be my advisor? And they're going to start raising capital because of an idea. You know what we used to say in the Silicon Valley startup world, you can raise on just a PowerPoint. I think in the blockchain world, you could raise on just an idea? And then maybe a white paper? And the white paper is one page? And so you've raised a bunch of capital, you have a white paper. >> Now you got to build it. >> Now you got to build, you got to write a smart contract, you got to build it, you got to do it, and then everyone loses excitement and it goes back to our previous conversation the development talent. So, another thing not being discussed in the space is company employee retention, right? So if you have a growing number of ICOs, that have very large budgets because investors have found a way to sink millions of dollars into a company early, you've got $5 million in the hands of a company to start, well this company can afford to pay someone a very ridiculous salary to come join them to write the smart contract now. So they could offer an engineer 500 Eth a month to come join them for three months. So you have good engineers just bouncing from one ICO to the next and as soon as the ICO goes live, they quit. This is a problem to companies who are-- >> It's migration, out migration. >> How do you retain, even capital? >> Companies like Hosho, ShapeShift, companies that are selling picks and shovels of the industry, that want to be household names in the space, we have to really think about how we're going to retain our employees in the space. >> So the recruitment and bringing on the new generation, we were also talking off camera about Bill Tye and the younger generation and kind of riffing on the notion that, because there is a new set of mission-driven developers and builders, on the business side as well. Your thoughts and reaction to what you see and what you see that's good and what you see that we need more of? >> So the most powerful thing in the blockchain space that I think is so exciting is that you have a lot of people between the age of 25 and 35 that don't come from money, that didn't go to Stanford, didn't go to Y Combinator, they're probably not white, from-- >> John: Ivy League schools. >> Ivy League schools. I'm not trying to make it about race, but if you're a white male and went to Stanford and went to Y Combinator, chances of you raising VC money on sand hill are a lot higher, right? And you have a guy looking like me who didn't go to Stanford, doesn't come from money, running up and down sand hill, I have personally faced that battle and it wasn't easy. And we were based in Vegas and so being based in Vegas, I'd also have to deal with so why do you live in Vegas? When are you going to move to Silicon Valley? And if we invest in you, you're going to open an office in sand hill right? And now in the blockchain world, what's exciting is you have so many heavy-hitters running as founders, some of the most successful companies in the space, who don't come from money and a big prestigious background, but they're honest, they're hard-working, they're putting in 12 to 15 hours of work every single day, seven days a week. And to space, six weeks is like six years. And we all have a level of trust that goes back to times when we were all running struggling startups. And so our bond is, to me, even more significant than what must have been between Keith Rabois and Peter Thiel in the PayPal Mafia. We have our own mafias being formed of much stronger bonds of younger people who will be able to share much more significant deal flow so if the PayPal Mafia was able to join forces to punch out companies like eBay and Square, wait 'til companies in this space, we have young, heavy-hitters right now who are non-reliant on some of the more traditional older folks. Wait 'til you see what happens in the next couple years. >> Hartej, great conversation. And I want to get one more question in. We've seen Keiretsu Forum, mafias, teams more than ever as community becomes an integral part of vetting and by the way trust, you have unwritten rules. I mean baseball, Dave and I used to do sports analogies. >> Self-governance. >> Reggie Jackson talked about unwritten rules and it works. If you beam the batter, the other guy, your best star, your side's going to get beamed. That's an unwritten rule. These are what keeps things going, balanced through the course of a season. What are the unwritten rules in the Ethos right now? >> Honesty, transparency, and that's the key. We need self-governance. This is a very unregulated market. There's rules being broken by people who are ignorant to the rules. The most common rule I've seen being broken is by people who are not broker dealers, running around fundraising capital, they don't even know what an institutional advisor license is. They don't know what a Series 7 and a Series 63 is. I asked a guy just last night, he said I'm pooling capital, I'm syndicating, let me know if you want in on the deal. And I said when did you take your Series 7? He goes what's that? Get away from me. You're an American, you need to look up what US securities laws are and make sure that you're playing by the rules and if someone who doesn't know the rules has entered our inner circle of investors, of advisors, of people sharing deal flow, we have a good network of people that are closing the loop for companies, whether it's lawyers, investors, exchanges, security auditors, people who write smart contracts, dev shops, people who write white papers, PR marketing, people who do the road show, there's a full circle-- >> So people are actually doing work to put into the community, to know your neighbor if you will, know the deals that are going down, to identify potential trip wires that are being established by either bad actors or-- >> KYC, AML, this is a new space that's also attracting people that have a criminal background. Right? And that's just a harsh reality of the space. That in the United States if you have a felony on your record, maybe getting a job has become really difficult and you figured let's do an ICO, no one's going to check my record. That is a reality of the space. Another reality is the money that was invested into this entire ICO clean. Right, that's a massive issue for the US government right now. It's been less than 15 hours since the SEC has issued actually subpoenas to people on this exact topic, today. >> This is a great topic, we'd like to do more on. >> Dozens of them. >> We'd like to continue to keep in touch with you on The Cube. Obviously you're welcome anytime, loved your insight. Certainly we'd love to have you be an advisor on our mission, you're welcome anytime. >> For sure, let's talk about it. Come out to Las Vegas. Hosho's always happy to host you. >> John And Dave: We're there all the time. >> The Cube lives at the sands. >> It's our second home. >> Come by Hosho's office and let us know. Vegas is our home. We are hosting a conference in Vegas after DEFCON. So DEFCON is the biggest security conference in the world. You have the best black hats and white hats show up as security experts in Vegas and right on the tail end of it, Hosho's going to host a very exclusive invite-only conference. >> What's it called? Just Hosho Conference? >> Just Blockchain. It'll be called the just, it'll be by the Just Blockchain Group and Hosho's the main backer behind it. >> Well we appreciate your integrity and your sharing here on The Cube, and again you're paying it forward in the community, that's great. Ethos we love that. That's our mission here, paying it forward content. Here in the Bahamas. Live coverage here at PolyCon 18. We're talking about securitized token, a decentralized future for awesome things happening. I'm Jeff Furrier, Dave Vellante. We'll be back with more after this short break. (upbeat music)

(triumphant music) >> Hello and welcome to a special CUBE Conversation, exclusive content here in Palo Alto Studios, I'm John Furrier, the co-founder of SiliconANGLE Media, and cohost of theCUBE. We have exclusive news with Vectra Networks announcing new funding, new R and D facility. I'm here with the president and CEO, Hitesh Sheth, who's the president and CEO. Welcome to theCUBE Conversation, congratulations. >> Thank you John. glad to be here. >> So you've got some big news. >> Vectra Networks, you guys doing some pretty cool stuff with AI and cyber. >> Correct. >> But it's not just software, it's really kind of changing the game with IT operations, the entire Cloud movement, DevOps automations, all impacting the enterprise. >> Hitesh: Yes. >> And other companies. >> Hitesh: Yes. >> Before we dig into some of the exclusive news you guys have, take a minute to talk about, what is Vectra? What is Vectra Networks? >> Maybe it'd be useful to give you context of the way we see the security industry evolving. And if you think about the last 20 years, and if you were to speak to the security person in an enterprise, their primary concern would be around access banishment, who gets in, who gets out. The firewall industry was born to solve this problem. And you know, in many ways its been a gift that's kept on giving. You know, you've got companies with multi-billion dollar evaluations, Palo Alto, Checkpoint, Fortinet, you know, piece of Cisco, etc, right? There's roughly about 40 billion dollars on the market cap sitting in this industry today. Now, if you go back to the same enterprise today, and you look at the next 5-10 years and you ask them, "What is the number one issue that you care about?" Right? It's no longer who's getting in and out from an access policy standpoint, it's all about threat, management, and mitigation. So, the threat's signal is now the most important commodity inside the enterprise and the pervasive challenge for the customer, the enterprise customer, is, "How do I get my hands on this threat's signal in the most efficient way possible?" And we, at Vectra, are all about automating and helping our customers hunt for advanced cyber attacks using artificial intelligence. >> Where did you get the idea of AI's automation? I've always said in theCUBE, "Oh, AI's a bunch of b.s. Because real true AI is there. But again, AI is really kind of growing out of machine learning. >> Hitesh: Right >> Automating, and so this kind of loose definition but certainly is very sexy right now. People love AI. >> Hitesh: Correct. >> I mean, AI is awesome. But at a practical matter, it seems to be very important for good things, also for the enterprise, where'd you get the idea for using AI for cyber? >> Well, you know, I would go back to in my journey intersection with the notion of using AI for cyber security, Back in about 2010, there are major cyber events reported in the press. At that time, I was in the networking sector and in the networking sector, we all looked at it and said, "You know, we can do something about this," and being good networking company is, we thought we would build chips that would do DPI and do packet inspection. It was, too be blunt, old school thinking, okay? Fast forward to 2012 and I was sitting with Vinod Khosla of Khosla ventures and we were talking about the notion of security. How can you transform security dramatically >> Mhmm. >> Hitesh: And this is when we started talking about using artificial intelligence. It was very nascent and frankly, if you went up and down Sand Hill at that time, you know, most of the venture companies would have- and they did, because we were raising money at the time, they would look at us and said, "You guys are nuts. This is just not going to happen." You know, it's very experimental, it would take forever to come to pass. But that's usually the best time to go and build a new business and take a risk, right? And we said, you know what, AI has matured enough. >> By the way, at that time, they were also poo-pooing the Cloud. >> Absolutely. >> Amazon will be nothing. >> Yeah, exactly. Generally, a good time, a good time to go and do something revolutionary. But, here are the other things to know. Not only had the technology around AI and its applicability had advanced enough, but two other things have happened at the same time. The cost of compute had changed dramatically. The cost of storage had changed dramatically. And ultimately, if AI is going to be efficient, not only is the software got to be good, but the computer's got to be valid as well. Storage got to be valid as well. These three things were really coming together on their timeframe. >> Well, what's interesting, let's dig into that for a second because knowing what the scene was with networking at the time, you said, "old thinking," but the state of the art, you know, In the 90's and 2000's was, hardware got advanced, so you had wire speed capability. So, you can do some cool things like, you know, like still move through the network and do some inspection. >> Hitesh: Correct. >> And you said DPACK is recommended But that's the concept of looking at the data. >> Hitesh: That's correct. >> John: So, okay, now they might have been narrow view so now you take it back >> Hitesh: Yes. >> With AI, am I getting it right? You're thinking of zooming out saying, okay, >> Hitesh: A couple of things. >> You find that notion of inspection of data >> Right. >> With more storage, more compute >> But it comes down to also, you know, what data are you looking at, right? When you had wire spec in booties, you would apply your classic signature based approaches. So you could deal with known attacks, right? What is really happening, like 2011-2012 onwards is, the attack landscape is more stored dramatically. It changes so fast that the approach of just dealing with the known was never going to be enough. >> Yeah. >> So, how do you deal with the unknown? You need software that can learn. You need software that can adapt on the fly. And this is where machine learning comes into play. >> You got to assume everyone's a bad actor at that point. >> You got to assume everybody has been infiltrated in some way or fashion. >> Well, the Cloud, certainly, you guys were on the front end, kind of probably thought we're crazy with other VC's, you mentioned that. But at the time, I do remember when Cloud was kind of looked at as just nonsense. >> Yeah >> But if you then go look at what that impact has been, you're in the right side of history, congratulations,. What really happened? When was the C change? You mentioned 2012, was that because of the overall threat landscape change? Was that because of open source? Was that because of new state sponsored threats? >> Hitesh: Yeah. A couple things. >> What was the key flash point? >> Hitesh: A couple of things. We saw, at the time, that there was an emerging class of threats in the marketplace being sponsored by either state actors but we also saw that there was significant funding going into creating organized entities that were going to go and hack large enterprises. >> John: Not state sponsored directly, state sponsored, kind of, you know, >> On the side. >> Yeah, on the side. >> Let's call them, "For Profit Entities," okay? >> Sounds like Equifax to me. (laughter) >> That's a good point. And we saw that happening. Trend two was, there were enough public on the record, hacks are getting reported, right? Sony would be a really good example at the time. But just as fundamentally, it's not just enough that there's a market. The technology has got to be sufficiently ready to be transformative, and this is the whole point around what we saw in compute and storage and the fact that there was enough advancement in the machine learning itself that it was worth taking a risk and experimenting to see what's going to happen. And in our journey, I can tell you, it took us about 18 months, really, to kind of tune what we were doing because we tried and we failed for 18 months before we kind of came to an answer that was actually going to gel and work for the customers. >> And what's interesting is having a pattern oriented to look for the unknown >> Hitesh: Yeah >> Because it's, you know, in the old days was, "Hey, here's a bunch of threats, look for'em and be prepared to deploy." Here, you got to deal with a couple of the unknown potentially attack. But also I would say that we've observed the surface areas increased. So, you mention Checkpoint in these firewalls. >> Hitesh: Yes. Absolutely. >> Those are perimeter based security models. So you got a perimeter based environment. >> Hitesh: Correct. >> Everyday. >> Hitesh: And you got IOT. >> IOT. So it's a hacker's dream. >> It's absolutely. The way I like to think about it is you got an end by end probatational issue. You got an infinite possible, if you're a hacker, you're absolutely right, it's Nirvana. You've got endless opportunities to break into the enterprise today. It's just going to get better. It's absolutely going to get better for them. >> John: Well, let's get to the hard news. You guys have an announcement. You've got new funding >> Hitesh: Yeah. >> And an R and D facility, in your words, what is the announcement? Share the data. >> We're really excited to announced that we have raised closed a round of 36 million dollars, Series D funding, it's being led by Atlantic Bridge, they are a growth fund, and they've got significant European roots, and in addition to Atlantic Bridge, we're bringing on board two new investors, two additional investors. The Ireland's Strategic Investment Fund, number one, effectively the sovereign fund of Ireland, and then secondly, Nissho Electronics of Japan. This is going to bring our double funding to 123 millions dollars, today. What we're going to be using this funds for is to find things with. One is the classic expansion of sales and marketing. I think we've had very significance success in our business. From 2016 to 2017, our business grew 181% year end year, subscription based, all subscription revenue. So, we're going to use this, this new fuel, to drive business growth, but just as important, we're going to drive our needs growth significantly. And as part of this new funding, we are opening up a brand new R & D center in Dublin, Ireland. This is our fourth R & D center. We've got one here in San Jose, California. We've got one in Austin, Texas, Cambridge, Massachusetts, and so this is number four. >> John: So, you hired some really smart people. How many engineers do you guys have? >> So, we are about a 140% company, roughly half the company is in R and D. >> I see a lot of engineering going on and you need it, too. So let's talk about competitors. Darktrace is out there, heavily funded companies, >> Hitesh: Yes. >> Their competitor, how do you compare against the competition and why do you think you'll be winning? >> I can tell you, statistically, whether it is Darktrace or we run into barcoding with Cisco as well. We win into large enterprise. We win 90% of the time. [Overlapping Conversation] >> It's actually correct. And I'll describe to you why is it that we win. We look at people like Darktrace and there are other smaller players in the marketplace as well And I'll tell you one thing fundamentally true about the competitive landscape and that differentiates us. AI is on everybody's lips nowadays, right? As you pointed out. But what is generally true for most companies doing AI and I think this is true for our competition as well, it tends to be human augmented AI. It's not really AI, right? This is sort of like the Wizard of Oz, you know, somebody behind the curtain actually doing the work and that ultimately does not deliver the promise of AI and automation to the customer. The one thing we have been very - >> John: They're using AI to cover up essentially manual business models for all people added, is that what you're saying? >> Hitesh: That's correct. Effectively, it's still people oriented answer for the customer and if AI is really true, then automation has got to be the forefront and if automation is really going to be true, then the user experience of the software has got to be second to none >> John: So, I know Mike Lynch is on the board of that company, Darktrace, he was indicted or charged with fraud to front for HP for billions of dollars. So, is he involved? Is he a figurehead? How does he relate to that? >> I think you should talk to Mike. You should put him in this chair and have this conversation. I recommend it, that would be great. >> John: I don't think he'd come on. >> But my understanding is that he has a very heavy hand in the reign of Darktrace. Darktrace, if you go to their website, so this is all public data, if you look at their management chain, this is all Autonomy people. What that means, respect to how Autonomy was running and how Vectra is being run, is for them to speak about, what I can tell you is that, when we meet them competitively, we meet other competitors. >> John: I mean, if I'm a customer, I would have a lot of fear and certainty in doubt to work with an Autonomy led because they had such a head fake with the HP deal and how they handled that software and just software stack wasn't that great either. So, I mean, I would be concerned about that. [Overlapping Discussion] >> History may be repeating itself. >> Okay, so you won't answer the question. Okay, well, let's get back to Vectra. Some interesting, notable things I discovered was, you guys had been observing what's been reported in the press with the Olympics. >> Hitesh: Correct. >> You have information and insight on what's going on with the Olympics. Apparently, they were hacked. Obviously, it's in Korea, so it's Asia, there's no DNS that doesn't have certificates that have been hacked or whatever so, I mean, what's going on in South Korea with the Olympics? What's the impact? What's the data? >> Hitesh: Well, I'm going to think, what is really remarkable is that, despite the history of different kinds of attacks, Equifax, what have you, nation state events, political elections getting impacted and so forth, once again, a very public event. We have had a massive breach and they've been able to infiltrate their systems and the remarkable thing is they- >> John: There's proof on this? >> There's proof on this. This is in the press. There's no secret data in our part, which is, this very much out there, in the public arena, they have been sitting in the infrastructure of the Olympics, in Korea, for months and the remarkable thing is, why were they able to get in? Well, I can tell you, I'm pretty sure that the approach to security that these people took is no different than the approach of security most enterprises take. Right? The thing that should really concern us all is that they chose to attack, they chose to infiltrate, but they actually paused before really fundamentally damaging the infrastructure. It goes to show you that they are demonstrating control. I can come in. I can do what I want for as long as I want. I can stop when I want. >> John: They were undetected. >> They were undetected. Absolutely. >> John: And they realized that these attacks reflected that. >> Absolutely. And given the fact there seems to be a recent trend of going after public events, we have many other such public events coming to bear. >> How would you guys have helped? >> The way we would help them, most fundamentally is that, look, here's the fundamental reality, there are, as we've discussed just a second ago, there are infinite options as to break in, into the infrastructure, but once you're in, right? For people like you and I, who are networking people, you're on our turf and the things you can do inside the network are actually very visible. They're very visible, right? It's like somebody breaking through your door, once they get in, their footprints are everywhere, right? And if you had the ability to get your hands on those footprints, right? You can actually contain the attack at- as close to real time as possible, before any real damage is done. >> But then we're going to see where the action is, no doubt about it, you can actually roll that data up and that's where the computer- >> And then you could apply machine learning. You can extract the data, look at the network, extract the right data out of it, apply machine learning or AI and you can get your hands on the attack well before it does any real damage. >> John: And so to your point, if I get this right, if I hear ya properly, computers are much stronger now. >> Hitesh: Correct. >> And with software and AI techniques, you can move on this data quickly. >> Hitesh: Correct. But you have got to, you've got to have a fundamental mindset shift, which is, "I'm not in the business of stopping attacks anymore, I should try, but I recognize I will be breached every single time. So, then, I better have the mechanisms and the means to catch the attack once it's in my environment." And that mindset shift is not pervasive. I am 1,000% sure at the Olympics that people designed the security search have said, "We can stop this stuff, don't worry about it." You had that taught differently that would not be in this position today. >> This is the problem. In all society, whether it's a shooting at a school or Olympic hack event, the role of data is super critical. That's the focus, thanks for coming on and sharing the exclusive news at theCUBE with exclusive coverage of the breaking news of the new round of funding for Vectra Networks. I'm John Furrier. Thanks for watching. >> Hitesh: Thank you, John. (triumphant music)