When ChatGPT launched in November 2022, a few thoughts ran through Evan Reiser’s mind. “It’s way better than I thought, and this is gonna be amazing for the world,” and, then, “Oh, my God, the bad guys are going to get this too,” he recalls.
Reiser cofounded his startup, Abnormal Security, in 2018 with Sanjay Jeyakumar to help detect and prevent email cyber attacks. The company uses A.I. and machine learning for behavioral profiling, analyzing data from company platforms like Slack to help spot socially-engineered email scams and determine whether it was sent by an actual employee, or by a hacker posing as one. But the explosion in popularity of ChatGPT and other chatbots has vastly increased the sophistication of email attacks, he says—and people are greatly underestimating the power of the technology.
The bad news? “Right now, I think the defenders are at a disadvantage,” and it’s likely that A.I.-generated cyber attacks will push cybersecurity “in the wrong direction for a year or two until we catch up,” Reiser says. But he believes that eventually, “defensive” A.I.—that is, A.I. used to protect companies—will come out the ultimate victor. “You will need A.I. to fight A.I. in the future. I know it sounds a little cheesy, [but] the reason I think that defender A.I. will be superior is because it's going to have a data advantage,” he argues. Reiser notes that cyber attackers using A.I. have only publicly-available data, while A.I. defenders have that same public data, plus troves of internal private data from companies themselves (like emails and workflows and customer relationships).
Of course, as the CEO of a cybersecurity startup, Reiser is optimistic: “I think we'll actually be in a better state 10 years from now than we are today.” Abnormal Security recently released CheckGPT, a tool that enables companies to determine whether a suspicious email was written using generative A.I. tools like ChatGPT.
Reiser says the company currently isn’t planning on raising more funding. The startup was last valued at $4 billion in early 2022, with big VC backers including Greylock Partners, Insight Partners, and Menlo Ventures (the firm raised an undisclosed amount of funding from CrowdStrike Holdings in March of this year). Abnormal is still dwarfed by buzzy cloud security startup Wiz, which focuses on protecting companies’ infrastructure in the cloud, and is valued at over $10 billion, with $200 million in sales. Reiser says Abnormal and Wiz have “talked about, ‘Hey, what's working for you?’ We've tried to trade notes." (The company later said Wiz is not a competitor.)
As for Abnormal, the firm just announced they hit $100 million in annual recurring revenue. Reiser says that the company is intentionally not profitable right now to focus on investing in products, but that they could become profitable “in a quarter or two, if we decided to.”
When I asked Reiser if announcing the ARR figure was a precursor to an IPO (something they’ve teased before), he was coy, but said that they could go public in a couple of quarters, or wait a couple of years, emphasizing there wasn’t urgency. He said the company would likely want to be profitable before they listed.
Abnormal and other such A.I. companies are facing a dilemma: A.I. technology is improving at such breakneck speed that startups are essentially always behind. For all our companies’ sakes, we can only hope that Reiser is right, and that the forces of good A.I. catch up.
Real estate startup acquisition buzz…Beleaguered real estate investment firm Cadre, cofounded by Ryan Williams and Jared and Josh Kushner, is reportedly in talks to be acquired at a clearance-price valuation. According to The Information, Cadre, which in 2017 was valued at $800 million by investors including Andreessen Horowitz and Thrive Capital, is nearing a deal with alternative investment platform Yieldstreet to be acquired at what could be around a $100 million valuation (Axios reports the deal is too speculative for a firm valuation yet). Cadre didn't respond to my request for comment. It’s another example of the struggles that proptech—and, in general, highly-valued—startups are facing as both the interest rate and commercial real estate environments have changed.
Programming note…By the time you read this, I’ll be heading off for a week-long vacation. As always, please send deals to termsheet@fortune.com. See you in a week!
Cheers,
Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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Jackson Fordyce and Joey Abrams curated the deals section of today’s newsletter.
