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Inner Loop Capital Updates – May 2024

Inner Loop Capital is a pre-seed and seed venture capital fund investing at the frontier of Digital Infrastructure and AI. Inner Loop’s thesis is that the $600B+ Infrastructure Software sector (Cybersecurity, Cloud Tech, and Data Science) is being simultaneously accelerated and disrupted by AI. Inner Loop is based in Baltimore, and the current portfolio spans from San Francisco to Israel. Inner Loop is currently investing out of a $30m-target Fund II. Inner Loop Capital is a solo-VC firm managed by Justin Label.


Firm and Community Updates

Welcome to the May 2024 Community Update on Inner Loop Capital and our portfolio companies. 

NVCA AI Working Group

First up is some firm-level and personal news. I have joined the NVCA’s AI Working Group, where the venture industry association will solicit and compile views on national and state-level AI policy recommendations. It is fantastic to join with some old and new colleagues to engage on these important topics. As one of just a handful of members who can be in D.C. regularly, I’ve offered myself up as an in-person resource as needed, and we will see how that develops.

On the policy front, Senators Schumer, Rounds, Heinrich, and Young introduced a bipartisan AI roadmap focused on strengthening American leadership in AI technology. I am personally even more compelled by the proposed Create AI Act, sponsored by a similar set of Senators, plus Senator Booker. This is a forward-thinking approach. In my opinion, legislators should be at a minimum making sure that government centers of excellence keep up with private industry in their use and advancement of AI. Think of the goal as not allowing the IT gap that was abruptly revealed in the 2014 roll out of the Affordable Care Act to emerge again in AI. Doing so could also be an important input to ensuring continued American leadership in this critical field. 

Thank you to Jonas Murphy, the NVCA’s Director of Government Affairs, for organizing our group and keeping us closely informed.

RSA 2024 Recap

Inner Loop spent an invigorating four days at the RSA Security Conference in San Francisco a few weeks ago. It’s impossible to efficiently summarize the dozens of meetings, catch-ups, and interactions we had during the show. Suffice to say that the headcount, energy, and optimism was at a post-Covid high, and that AI for Cyber and Cyber for AI was infused into every product and pitch. For a more complete recap, see Tenable Founder and close Inner Loop collaborator Ron Gula’s entertaining video (14 minutes). Thank you to friends who spent their precious RSA time at Inner Loop events and in discussions with us. 


Portfolio and Industry News

The Inner Loop portfolio is 36 companies strong (including two thriving angel investments from my 2015-2018 angel investing period), and there is a lot of activity across the whole portfolio. Let’s jump in!

Portfolio News

The Inner Loop Portfolio announced some substantial financings and commercial successes since our last update:

Sublime Security’s significant Series A was announced in April and covered by Forbes (paywall).

The $20m Series A was led by Index Ventures, and represents the largest round raised by an Inner Loop Capital Fund I portfolio company. Congratulations to Founders Josh Kamdjou and Ian Thiel and the entire Sublime Security team. Thank you to GreyNoise founder Andrew Morris for first introducing me to Josh – a full five years ago! And thank you to co-investors Stone Mill Ventures, Slow VC, Decibel, and many others for being such great partners on this ride. Here’s to more great things from Sublime in 2024 and beyond!

StepSecurity, a cybersecurity firm specializing in safeguarding CI/CD pipelines and infrastructure, announced its $3 million seed funding round led by Runtime Ventures (Michael Sutton again! and David Endler), with participation from Inner Loop.

Other investors include SaaS Ventures, DeVC, and notable angel investors. StepSecurity helps secure over 3,000 open-source projects, including ones maintained by key entities like CISA, Google, and Microsoft. Major security incidents such as the 2020 SolarWinds attack and the narrowly-averted xz Utils attack highlight the need for the industry to systematize its software development pipelines. The investment will fuel StepSecurity’s commercial expansion efforts.

Craft has secured a substantial $28 million contract with the Department of Defense, bolstering due diligence and foreign influence checks for federal government contractors. Congratulations to Ilya Levtov and the entire Craft team on this amazing milestone!

Several of our companies garnered major public recognitions and awards recently:

Tamnoon‘s CEO Marina Segal, crushed her RSA LaunchPad pitch, introducing their Managed Cloud Detection and Response offering. Moreover, the Forrester analysts in attendance deemed Tamnoon to be the most compelling of those LaunchPad presenters: “Tamnoon is Our Pick”.

SCYTHE was featured on 60 MINUTES, showcasing its platform’s role in helping companies enhance their cybersecurity strategies and defenses against threats like Scattered Spider.

DNSFilter has been honored with a 5-Star Award in CRN’s 2024 Partner Program Guide, recognizing it as an exceptional channel partner. I invested in DNSFilter in 2019 on the thesis of reinvigorating DNS Security, but the company has also gone on to be the most successful channel sales security company in our portfolio, an important theme that emerged later with our investments in Evo Security, Phin Security, and SaaSAlerts.

Our portfolio companies announced several important product and commercial partnerships this month:

DNSFilter‘s even bigger announcement is the public unveiling of a years-long collaboration with Amazon’s eero Plus secure mesh networking system. Now, with the integration of DNSFilter’s Guardian VPN, the partnership is finally out in the open. Congratulations to Founder Ken Carnesi and the whole team!

GreyNoise Intelligence has been selected to collaborate with Microsoft on the development of Copilot for Security. This partnership recognizes GreyNoise’s deep and unique expertise in the security signals that can be gleaned from Internet-wide traffic flows. It is also consistent with a core theme at Inner Loop lately. Even companies we funded before the AI Platform Shift are increasingly driving their business through AI innovation.

Gigasheet has launched an innovative feature, Live URL, enabling seamless data integration with BI tools and spreadsheets. Gigasheet’s spreadsheet UI is simply easier to work in than big data tools for many use cases. Now that the data can seamlessly flow back and forth, Gigasheet users will get more value than ever from the platform.

Clear Skye has released Clear Skye IGA 5.1, enhancing identity management with streamlined deployments, improved employee change management, and better visibility into identity data. Our Clear Skye thesis remains unchanged since 2020: ServiceNow is the system of record for enterprise IT and change management. Identity Governance is fundamentally an IT and change management function that underpins all enterprise Identity Security. IGA needs to be tightly integrated with – indeed, it should be built on – the NOW Platform.

AppOmni has launched its innovative Zero Trust Posture Management (ZTPM) solution, enhancing SaaS security by extending Zero Trust principles to the application layer. This strikes me as a quantum leap forward for the company and the industry. While the principles of Zero Trust are nearly two decades old, they have traditionally been applied to the infrastructure, identity, and network layers. So much business value – and security risk – lives in the SaaS layer, which AppOmni was founded to protect. Integrating the Zero Trust approach across all layers will provide improved protection for AppOmni’s large roster of customers.

xtype has introduced its newest offering, xtype Clone View, now accessible on the ServiceNow marketplace and included in xtype Enterprise, aimed at helping ServiceNow customers overcome significant cloning productivity challenges. ServiceNow is a critical enterprise platform, and its extensibility is a key reason why. But that customizability is also an Achilles’ Heel – what processes manage the software development that happens in and on ServiceNow? This is what xtype addresses for ServiceNow’s customers – nearly 1,900 of which spend more than $1m with ServiceNow – and their $10 billion of ARR.

Sublime Security CEO Josh Kamdjou joined Risky Business News to introduce the company’s latest feature focused on attack surface reduction for email security. Similar to the way AppOmni extended Zero Trust to SaaS, Josh offers critical insights on the value of bringing ASR to email. Inner Loop companies are everywhere extending and elevating security thought leadership!

Ad Interim Addendum – Updates on the AI Platform Shift

Inner Loop publishes a quarterly letter on our evolving views and investment themes in AI, called Ad Interim. The space moves so quickly however, that we have started to include briefs in our monthly updates as well: Ad Interim Addendum.

Travis May, a repeat CEO, has written a thoughtful piece on Company-Building During the AI Wave. May’s approach mirrors my own thinking that some investing patterns have to change when we are in the beginning stages of a platform shift. May offers seven guidelines, the first of which is:

Regular readers of these letters will see strong parallels between May’s thinking and my own. In Issue #4 of Ad Interim, I wrote: “Investing during a platform shift significantly increases the chances of being involved in future industry leaders. I honestly believe that it requires a different mindset and risk tolerance.”

Pete Soderling discusses the successive generations of data tools, from “Big Data” ten years ago, to the “Modern Data Stack”, to AI-Driven data tools today. He also discusses the risks of investing in a space with dozens of undifferentiated start-ups and a sector that now sports over 2,000 vendors. Pete is among the most experienced data investors in the industry, and his cautions and guidelines are well-taken. The mere count of start-ups doesn’t concern me – Cybersecurity has a comparable number and continues to generate strong venture returns – but the risks of undifferentiation are material. As Inner Loop is working in this space more and more, we are also approaching it with a specific risk framework, and will try to align our largest bets with the most seasoned teams and co-investors. 

Those 2,000 vendors, by the way, are captured on Matt Turck’s 2024 MAD Landscape – ML, AI and Data. (PDF and Interactive versions.) Congrats to FirstMark, Matt, and his collaborators for publishing the annual edition of this canonical guide to the space.

Other Industry News (All Podcast Edition)

I rather enjoyed listening to Bessemer’s Jeremy Levine on the Logan Bartlett Show, a Redpoint Ventures podcast. I will, however, now refer to Jeremy as an “iconic investor”, every time I address him or refer to him.

It was only a matter of time before Cybersecurity and social media guru Pramod Gosavi launched a podcast. I’ve gotten to know Pramod as the lead investor in our company Leen Security and have been thrilled to collaborate with him over the past year. Pramod’s podcast, a collaboration with entrepreneur Shashank Tiwari is called “Zero Hallucinations”, and launches soon. This is guaranteed to be information rich and deeply entertaining!


Events

I will briefly be around the Gartner Security and Risk Management Conference in National Harbor, Maryland on Wednesday, June 5. If you are in the area, please ping me to connect.


Archives and Please Be In Touch

Archives for both the Firm and Fund Updates (twice per quarter) and Ad Interim: Provisional Thoughts on AI (once per quarter) are available from the Inner Loop Capital website. Please visit innerloopcap.com/news to get caught up.

Now that you are up-to-date on all Inner Loop activities, please reach out any time. I welcome:

  • Discussions about any of the companies, technology sectors, or investment themes above
  • Introductions to founders or future founders in Digital Infrastructure, including Cybersecurity, Cloud Tech, DevOps, DevTools, Data Science, and AI
  • Connections to potential co-investors or collaborators in these sectors
  • And drop-ins to Baltimore (or the greater Washington D.C., area) any time

Do not hesitate to reach out if you see something or have ideas on ways we can collaborate more closely. 


Justin Label
Managing Director
Inner Loop Capital

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