The CEO of cybersecurity company Cato Networks believes there’s an AI bubble, but he’s still writing checks.
Serial entrepreneur Shlomo Kramer told Business Insider: Although the promise of AI is “realizing at a much slower pace” than expected, he says he still believes in AI’s ability to deliver results in the long term.
He compared the current situation to the dot-com boom of the late 1990s, which led to the demise of many companies.
“There was a lot of devastation.” said Kramer, whose company aims to secure the digital and AI transformation of organizations. “But e-commerce is clearly a major part of our lives, and the same will be true for AI.”
Kramer said he believes some AI startups are overvalued, but many are also reasonably priced, and he continues to invest in companies he thinks are promising.
He said every startup needs “the right combination of team, market and product.” When evaluating a company’s products, he said he looks for: Specific criteria to make it a worthwhile investment.
Check 3 boxes
Kramer said he tries to check three boxes when evaluating products.
First, he says, a “hook” is needed. Concepts should be “instantly understandable” and intuitive, without overthinking or rationalizing, he said.
“I think that’s true,” Kramer said.
Second, the product should have the potential to evolve into a platform, or at least a “mini-platform” that can be expanded into something broader over time, the CEO said.
Third, Kramer said the team needs to have a clear vision of the use cases that will ultimately turn the platform into a monetizable business.
investment lessons
According to PitchBook, Kramer has made about 67 investments, including several successful enterprise software companies, including Palo Alto Networks, Gong, and Trusteer, which was acquired by IBM. But he also made some mistakes, he said.
Although he said he primarily invests in cybersecurity, he has “intellectual curiosity” in many areas, which is why he invests in AI fields other than cyber, such as pharmaceuticals and marketing. He said many of his investments in other areas had been mistakes, recognizing that it’s “much easier to get excited about something you don’t understand.”
“The deeper you understand something, the more granular it becomes,” Kramer said, adding that excitement usually comes from seeing the big-picture vision.
Kramer said his “perfect startup” would be a homegrown application that grew out of his team’s product needs. He said it’s important for entrepreneurs to “really understand the category” in which their idea is rooted and understand it from the customer’s perspective.
Kramer said this was the beginning of his first startup, Check Point Software Technologies, which he co-founded. He said the “secret sauce” was that former Check Point CEO Gil Schwed was a systems administrator and understood customers’ problems, so he was able to create the right solutions.
Check Point’s current market cap is about $18.9 billion, according to Pitchbook.
