Benner on Tech: Cybercrime's Rubicon and Ventureland Heats Up

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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People Are Talking About…

About a month ago I wrote that we could see malicious cyberattacks that look a lot more like terrorism and less like the usual hacker modus operandi, which is to steal and sell information. I'd heard that we were in the midst of a significant shift in the security landscape whereby cyberattacks once reserved for governments and critical infrastructure would be used against corporate America.

More than a few experts in the field (and readers of the column) were wary of the assessment. Cybercrime has existed as a money-making scheme for all manner of attackers for a long time, and it's very rare to see people attack unless it's for financial gain. As Jeremy Pickett, the former infosec engineer at PayPal, said then: “Ideologically motivated attacks only occur in extremely polarized areas, like Iraq.”

But it seems clear that the Sony Entertainment attack was in large part designed to destroy information, systems and morale at the company, and that financial gain wasn't the primary motive. Sony employees have been threatened by the attackers, and again there is no obvious financial motive. North Korea has denied any part in the attack, but investigators still believe that the country could be linked to the crime. And the FBI has told businesses across the country to be on the lookout for the kind of malware that wreaked havoc at Sony.

I revisit the topic because it's important to note that Sony could be a crossing the Rubicon-type event. It could mark the moment when a new breed of attacker crops up with more frequency, a hacker that cares a lot more about ideology than about making money. Corporations will have to worry about destruction that goes well beyond the theft of data. And if this sort of attack were trained on a company that's essential to the nation's critical infrastructure (such as a bank), then the damage would amount to an attack on the country.

* In somewhat related news: Reuters reports on North Korea's sophisticated cyberwarfare unit called Bureau 121 that’s an important part of the nation’s spying machine.

Ventureland

Uber angst

* The alleged rape of a passenger in Delhi has led the Delhi government to issue an order on Monday banning Uber India. As I mentioned last week, venture investors are hoping that India becomes one of Uber’s largest global markets, and the company recently raised more than $1 billion for a big international expansion push. This is definitely a case to watch.

* Rather than wait for Portland, Oregon, to revise its taxi rules to allow ridesharing apps, the newly humble Uber has decided to roll out Uber X over the objections of local officials. Portland Commissioner Steve Novick tells the Oregonian: “They think they can just come in here and flagrantly violate the law? This is really amazing. Apparently, they believe they're gods.”

Instacart could soon announce a huge Series C round that values the startup at $2 billion, TechCrunch reports. The grocery delivery startup was valued at $400 million as recently as last June, so the implication is that revenue is growing like crazy.

It’s important to remember that eye-popping valuations don’t necessarily guarantee a great return. As the Wall Street Journal’s Telis Demos and Shira Ovide point out, app-analytics firm New Relic and big data startup Hortonworks could soon go public at huge discounts to their $1 billion valuations they got in the private markets.

Obvious Ventures was recently launched by Twitter co-founder Ev Williams, Re/code reports. His idea is to invest in “world-positive” companies. Obvious hasn’t closed its first fund, but it has made investments in companies including energy efficiency company Flux and vitamin maker Olly.

Secret, the anonymous sharing app, will soon announce a major product overhaul. The company has raised at least $35 million, and GigaOm’s Carmel DeAmicis says that the changes are probably a bid to salvage an app that has plummeted in popularity.

Sherpa Ventures is raising up to $250 million for a growth equity fund called SherpaEverest. (Wow that space is getting crowded.) Dan Primack has the details in today's Term Sheet, saying that the firm's Form D filing does not indicate a first close.

The National Venture Capital Association has formed the NVCA Diversity Task Force to increase opportunities for women and minorities. Members include co-chairs Kate Mitchell of Scale Venture Partners and Ashton Newhall of Greenspring Associates.

People and Personnel Moves

Daniel Graf, Twitter’s former head of product, announced on Twitter that he’ll be leaving the company. Re/code notes that the former Google Maps manager ran Twitter’s product team and was demoted in late October.

Paul Devine, a former global supply manager at Apple, was sentenced to almost 3 years in prison on wire fraud, money laundering and conspiracy charges.

Companies

Facebook…

Chief Executive Officer Mark Zuckerberg has bought copies of Chinese President Xi Jinping’s book, “The Governance of China,” for his Facebook colleagues, Quartz reports. He tells Chinese state media that he wants employees to “understand socialism with Chinese characteristics,” which might not hurt if the country ever decides to lifts its Facebook ban.

Google…

Fortune lays out the different outcomes of Europe’s push to break up the search giant’s regional monopoly.

IAC…

Barry Diller wants $100 million for CollegeHumor, after acquiring a majority stake in the site for $20 million eight years ago. Fortune's Erin Griffith has the scoop and the analysis, saying that the site is on the block along with Funny or Die and the Onion thanks in large part to Walt Disney's arguably overpriced acquisition of Maker Studios. (Price tag: $1 billion.) “All the other incumbent traditional media companies … are all trying to figure out why Disney did that and what copycat transactions are credible alternatives.”

IBM…

The company launched the beta version of its cloud-based, predictive analytics tool Watson Analytics.

Cybercrime Never Sleeps

KrebsOnSecurity got its hands on an internal Treasury Department report that says Tor was used in a lot of bank account takeovers.

Bebe stores said that its payment processing system was breached between Nov. 8-26.

News and Notes

At the Digitising Europe conference in Berlin, Angela Merkel gives net neutrality a thumbs down.

Silicon Valley isn't the only hotbed of innovation. Check out this special series on Boston and innovation by Re/code's James Temple.

When Chris Hughes botched his handling of the New Republic’s (likely necessary) revamp, he was accused of being yet another Silicon Valley guy who thinks that a little disruptive tech wisdom is all it takes to right a sinking media ship. MIT Technology Review editor-in-chief Jason Pontin summed it up by writing: They’ve arrived from Mars with the typical arrogance of a tourist, overnoticing the wrong things. In his recently published defense, Hughes writes:

I’ve never bought into the Silicon Valley outlook that technological progress is pre-ordained or good for everyone. I don’t share the unbridled, Panglossian optimism and casual disdain for established institutions and tradition of many technologists. New technologies and start-ups excite and animate me, but they don’t always make our lives or institutions better. That’s one of the many reasons why I bought the New Republic — to preserve and invest in an important institution in a time of great technological change. Its voice and values have been important for a century, and technology should be used not to transform it but to develop and amplify its influence.

Maybe he fumbled not because he’s an ideologue, but because he’s bad at management, a skill that, in theory, can be learned.

ICYMI

Mashable’s complete history of Reddit.

Reddit co-founder Steve Huffman succinctly summed up the situation in an e-mail to Mashable: “It wouldn't be Reddit if they weren't dysfunctional.”

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Stacey Shick at sshick@bloomberg.net