Neal's Deals (Vol. 71) - When CrowdStrike strikes the crowd: A global IT wipeout ??????

Hey everyone - It's not often that I completely change my Neal’s Deals story on the morning of publication due to a major overnight tech event, but today is an exception. Early this morning, companies in Australia running Microsoft’s Windows operating system began reporting devices showing Blue Screens of Death (BSODs). Shortly after, reports of disruptions started pouring in from around the world, including the UK, India, Germany, the Netherlands, and the US. TV station Sky News went offline, and US airlines United, Delta, and American Airlines issued a “global ground stop” on all flights.

The widespread Windows outages have been linked to a software update from information technology (IT) and cybersecurity giant CrowdStrike. Cybersecurity officials believe the issues stem from a misconfigured or corrupted update that CrowdStrike pushed out to its customers, rather than a malicious cyberattack. As the news continues to develop, the situation highlights the interconnectedness and dependencies of the global IT community—if one big player goes down, all of its customers can fall like dominoes.

In this edition of Neal’s Deals, we will explore what CrowdStrike is, what went wrong, and delve into the far-reaching implications of this incident.

What is CrowdStrike?

CrowdStrike is a leading cybersecurity technology company that specializes in providing endpoint security, threat intelligence, and cyberattack response services. The company is renowned for its Falcon platform, which uses artificial intelligence (AI) and machine learning to detect and prevent breaches in real time. CrowdStrike’s software is widely used by various organizations, including Fortune 500 companies, government agencies, and global enterprises, to protect their digital assets and infrastructure from cyber threats.

What went wrong?

CrowdStrike’s software requires deep-level access to a computer’s operating system to effectively scan for threats. In this instance, computers running Microsoft Windows appear to be crashing due to a faulty interaction between a CrowdStrike software code update and the Windows system.

CrowdStrike CEO George Kurtz issued a statement confirming that a “defect” in a Windows update was the cause of the outages, emphasizing that it is not a security incident or cyberattack. He assured that the issue has been identified, isolated, and a fix has been deployed. Kurtz confirmed that Mac and Linux hosts are unaffected and directed customers to the support portal for further guidance. A Microsoft spokesperson also acknowledged the problem and expressed confidence that a resolution is forthcoming.

What are the implications?

CrowdStrike provides endpoint detection and response (EDR) to over 24,000 customers worldwide, scanning thousands of endpoints such as computers, ATMs, and IoT devices for real-time threats. The update issue disrupted major U.S. airlines, 911 call centers, the IT services of the Paris Olympics, and health systems globally. Hospitals in England, Israel, and Germany have also been particularly affected, with many resorting to manual operations while digital services remain inaccessible.

The faulty update from CrowdStrike has forced the impacted PCs and servers into a recovery boot loop, and created a significant knock-on public services and businesses globally.

This incident highlights our deep dependence on IT and software. When a system relies on multiple software solutions maintained by various vendors, it places significant trust in these providers. This scenario can create a single point of failure, as evidenced here, where thousands of firms have been impacted by one. History has shown that when a dominant player in a market fails at what they are supposed to do best, they lose customer confidence, creating opportunities for new competitors to enter the market. Once the dust settles, don't be surprised if CrowdStrike begins losing a significant portion of its market share.

Let’s get to it:

Cartken, an Oakland, Ca.-based maker of?diminutive sidewalk delivery robots, just raised $10 million in funding?led by 468 Capital.

Why this is interesting: Cartken launched its sidewalk delivery robots with a simple mission: deliver food like burritos, bento boxes, pizza, and pad thai to customers. Despite the seemingly straightforward task of moving between indoors and outdoors, the 30-person team at Cartken has carved out a niche in the autonomous vehicle industry. Operating on college campuses in Miami, Fairfax, Virginia, and Tokyo through partnerships with Uber Eats, Grubhub, and Mitsubishi Electric, Cartken’s robots average 36,000 deliveries per month. Now, they’re expanding into biotech, pharmaceutical, and automotive campuses. While some newly raised capital will scale their profitable sidewalk delivery business, most funds will "unlock new indoor use cases." Many robotics companies build robots without unique IP or specific use cases. What I like about this opportunity is the clear product-market fit and the functionality of the technology, making it much easier for investors to double down.

Hiki, a New York City-based dating app designed for neurodivergent adults, raised $2.9 million in seed funding from MassMutual and Precursor Ventures.

Why this is interesting: Hiki is pioneering a dating, friendship, and social platform designed for the Autistic community. Hiki, meaning "able" in Hawaiian, offers a safe space for Autistic adults to find friendship, love, and a sense of community. Autism, affecting an estimated 2% of the global population, has long been overlooked, leading to widespread loneliness and isolation. The platform, which has a rapidly growing and engaged user base, aims to provide more than just romantic connections. Hiki was built on the belief that friendship, love, and community are essential to happiness. Notably, many of Hiki's employees are Autistic, reflecting the company's deep commitment to the community it serves. I am very excited about this opportunity because it makes both moral and fiscal sense. Serving marginalized and underrepresented communities is the right thing to do, and people with disabilities represent a significant, yet largely untapped, market.

Vee, a New York City-based AI-powered nonprofit management platform, raised $7 million in seed funding led by TLV Partners.

Why this is interesting: We love a good pivot. Vee, founded in 2020, raised $13.5 million for a platform offering diverse volunteering opportunities. It helped HR teams coordinate and share charity events, fostering a community of giving back within companies. However, once the frothy tech market came back to reality, the team, mostly based in Israel and Miami, pivoted to developing AI agents for nonprofits. These virtual assistants help organizations manage social media and grant applications, respectively, at a fraction of traditional costs. Within a year, Vee gained over 100 U.S. clients, including the Network of Jewish Human Service Agencies and Cloud Veterans. The U.S. nonprofit sector, comprising 1.8 million organizations with $2.9 trillion in annual revenue, remains largely manual or using legacy enterprise software players, highlighting a significant opportunity for a new winner.

Deals in the Works:?If you want to learn more - feel free to reach out

1. Nurse staffing and scheduling software
2. Marketplace for sourcing global teams
3. AI tools for homebuyers
4. Sales training platform for pharmaceutical companies
5. Tech-enabled international mortgage broker

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Quote of the week:

"Do what we can, summer will have its flies."

— Ralph Waldo Emerson

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Have a great weekend everyone!