Listen: Next in Tech | Episode 67: Security M&A: Is winter coming?

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Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for the 451 Research arm of S&P Global Market Intelligence. And today, we're going to be looking at security mergers and acquisitions market, something that's been really active of late. And we're bringing back returning guests, Garrett Bekker and Brenon Daly. Gentlemen, welcome back to the podcast.

Brenon Daly

It's great to be back. I guess you must have run out of other analysts to join you. Happy to come back and talk it up with you.

Eric Hanselman

Oh, no, you're straight in our crosshairs with everything that's been going on.

Brenon Daly

For sure.

Eric Hanselman

And especially where we are coming up to the RSA Conference. We've got some perspectives that are happening there. Garrett, of course, you're right in the middle of all of this as well.

Garrett Bekker

Yes. Good morning. Thanks for having me back. And I get to skip out on RSA this year, so I'm lucky.

Eric Hanselman

Well, it's -- clearly, there's a lot going on, and there has been a lot going on leading up to this. And I want to start with what clearly is the M&A topic on everyone's mind that has a really significant security component to it. which is the Broadcom-VMware deal. So if we think about significant transactions, this certainly is one that kicks things off with a real bang.

Brenon Daly

Yes, and it's very much of the moment. And since, obviously, it just printed yesterday as we record this, third largest tech transaction in history, obviously the largest software transaction and, just to think about this, a seminal moment for what had been a virtually unknown company in Broadcom, right? Obviously, Broadcom is a little bit of a chip consolidation play, had rolled up in a number of almost 10 different chip companies along the way, still not a very -- certainly not a very well-known company and outside of sort of networking semiconductors.

And yet here it is, 3 years ago, right, we're just 4 years into this massive build-out, I mean it is unbelievable when you think about, from a standing start, they now have a $20 billion software portfolio. So think about that. Just to put that in context, right, that's basically the same size as IBM's software portfolio. And so IBM has been at it a little bit longer, call it, 20 years, 20 or 30 years.

Eric Hanselman

Well, as you say, if you look at the pace, It's pretty impressive.

Brenon Daly

Yes. And so it's the scale and the size. And remember, this is done in 3 transactions, right? You're talking about basically $90 billion of spend, $60 billion for VMware, $20 billion for CA, $10 for Symantec, right? So there's no other company on the planet that is doing these kind of sort of plate tectonic transactions.

And so now they've got a software portfolio that, if we run it, sort of if we screen it, what's happening versus other software providers, it is, by Cap IQ's estimation, the fifth largest software provider on the planet, Broadcom. And again, this is a -- not even a half a decade-old initiative, which just shows how much the market has swung, how much software has matured and just become part of the infrastructure, right?

That all this is, is it's basically almost a private equity style consolidation around a very specific vertical in infrastructure software, where you have all of the attributes that private equity would look for, in this case, in a publicly traded company. So just to put some points on that, cash flow is king for Broadcom. When they acquire companies, they tend to focus on the top-tier customers and sort of let the others roll off as they will.

You saw that in how they sold this to the Street yesterday. They were talking about almost doubling VMware's cash flow. They were talking about from basically $4.5 billion of free cash flow, which is a lot of money to play with, they're talking about taking it up to $8.5 billion in the next few years.

Eric Hanselman

This is sounding very private equity like their expectations about where they're going to take this, yes?

Brenon Daly

Exactly.

Garrett Bekker

So with Symantec, is that right, Brenon, like everything I've heard, it's not just been about cost-cutting -- traditional cost-cutting, but it's also been about rationalizing customers, right? Everything I've heard, Symantec would focus on their top 20% of their customer base and basically just let everyone else wither away.

Brenon Daly

And financially, it makes sense if you're cost conscious. Because if you think about like the debt that's associated with this, obviously, the rising interest rates make the threshold for return a little bit higher, and you have to service that debt. And the way to service that increased cash flow.

And that's certainly the plan of attack in Broadcom, and man, they have the precedents, right? They have that standing and they have that reputation as a highly efficient operator. And so it does open the question, Garrett, as we were kicking around before we started recording here, what happens when those 2 portfolios, when the portfolio from incoming VMware sort of overlaps because there is some overlap with the assets they already have inside of their sort of infrastructure bucket?

Garrett Bekker

Yes. No, for sure. And that's something we were kicking around yesterday. Our esteemed colleague, John Abbott, wrote up a report on the transaction yesterday, and one of the things we're trying to figure out was where are the synergies. The question is how much is this deal about operating synergies.

I know we've -- and we've talked about this before with Broadcom when they bought Symantec, right? Was it really about operating synergies? Or is this as much about financial engineering now? Broadcom is arguably operating like a private equity firm these days as much as they are a strategic acquirer.

It's interesting. So I jokingly said to my colleagues yesterday that maybe they're looking to use VMware and provide a virtualized operating layer for aging software companies. But one of the areas that we're really going to, I guess, look at, as you mentioned before, we got on, was around the endpoint.

Obviously, Symantec, one of the things they were known for was their endpoint security portfolio and their big presence there and some of the things they had acquired and developed over the years. Obviously, VMware acquiring Carbon Black, it was the last year or the year before, it was a big one. So it's going to be interesting to see how they look to combine those 2 assets.

My main area is around identity and access management, as you may know, or just for the sake of our listeners. From what I gather, I don't see there's a ton of overlap there. As far as I can understand, CA and Symantec basically rationalized their identity portfolio under Symantec's brand. And VMware did have a project -- a product a couple of years ago called VMware Identity Manager, that I think has essentially fallen by the wayside. So those are 2 initial areas I'm looking at. I don't know if there was a fair amount of overlaps anywhere else. I don't know maybe you're aware of that or so.

Brenon Daly

No, no. Those would be the main ones. And obviously, the networking side for what Symantec had versus -- and whilst Eric well knows, certainly, VMware has a bustling portfolio around some of the networking technology to the extent it extends into security, again, an area that they'll probably take a real hard look at.

Eric Hanselman

Well, it's an area where, while there's not an overlap, there is a lot of functional synergy, but that's presumably part of where they expect to do some level of integration, although it's not something that they've looked at a lot in terms of what they were expecting from the Symantec pieces for the last go-around.

Garrett Bekker

Quick thought, Eric, and I always tell me from way off base here, but I'm just seeing potential synergies with VMware on the NSX side and maybe on the segmentation as Symantec had invested a fair amount of zero trust and cloud security and sort of CASB, SaaS type stuff. I'm wondering if that's maybe an area of synergy.

Eric Hanselman

Yes, definitely an angle. It's not something that VMware has got a lot of depth in. I mean they've been looking to build what is a broader SaaS story with the integration of the VeloCloud pieces and sort of trying to add some of the access environment to that. And maybe their integration plays there.

My guess is, though, that the VMware technology is it more up to date in terms of its general approach. I mean whether or not that's actually got the network back in to be able to support it is a larger question but certainly potential there.

Brenon Daly

Yes, I don't think that we need to knock ourselves out too much on the integration because Broadcom tends not to deeply integrate. They focus on maintaining their existing customer base. Yes, app sales are great because they're high margin and, again, pushes through a lot more cash flow, but it's -- this isn't a massive engineering project that goes for the next 3 years where you're building one monolithic offering. This is mostly just servicing existing customers and expanding what you're selling them, not necessarily bundling it all up.

Eric Hanselman

Yes. Integration costs money, and that's going to impact cash flow.

Brenon Daly

So it takes time.

Eric Hanselman

It does indeed. And I guess I want to maybe look at the angle of what this does in terms of speaking to the broader security market. I mean if we think about how this is transforming a lot of expectations about what dealmaking is going to look like as we go through.

Clearly, there's a lot of frothiness around RSA every year always, this year with a shift moving RSA back to June. We've gotten ourselves kind of into the middle of the year and maybe the beginning of sort of that summer doldrum period, but there's also a lot of market impact that's going to be driving what could potentially happen in this environment as well.

Brenon Daly

It does. And if we think about sort of where we are right now in the tech M&A market and specifically in the information security market, this -- if we all agree that the VMware acquisition was basically a private equity -- came directly from the private equity playbook, cost-conscious, cash flow-focused, synergies delivered, if we think about it in terms of a financial transaction as opposed to a strategic transaction, it fits very well with the prevailing trend in the information security market right now.

2 of the 3 largest transactions announced in the information security M&A market have sponsors behind them, right? So we're talking about they took private SailPoint and the secondary for Barracuda. There's about $10 billion of spend right there. So these big transactions, right, whereas in think about the sort of go-go year of 2021, financial acquirers were very much secondary to big bets placed by strategic acquirers.

And here, I would point to Okta splashing $6.5 billion for Auth0. That was very much a vintage 2021 transaction. And to be honest, we haven't seen Okta in the market since then, right? A similar sort of story on a smaller scale for Rapid7, did its largest transaction in history last year about 300-and-change for threat intel vendor and yet hasn't followed that up with anything here in 2021.

So there's been a bit of a shift. Palo Alto Networks as well, nothing here in 2021. Microsoft did 2, maybe 3 information security transactions in 2021, nothing so far in 2022. So as the strategic or corporate acquirers and those sort of the names we immediately associate with the buyers in the information security market, for the most part, they have set out of the market driven out by, obviously, the downturn in the barrier market that we've had on Wall Street.

And so as they step out, in come the private equity acquirers. And again, they have had a disproportionately large impact in the market here as we might expect as we shift from a growth market more of the value orientation. At least that would be my sort of -- as we get set to kick off RSA, that's sort of the way I'm thinking about the M&A market.

Garrett Bekker

Yes. So very interesting, Brenon. So a couple of points. One, PE has been a growing influence in M&A and security for the last 10-or-so years. In fact, if you look -- I've been tracking this for going back over 10 years now. If you go back to, like, say, 2010, private equity was like 3% of all cybersecurity M&A deals. That actually hit its peak in 2021 up just shy of 40%.

And in fact, just to play a little bit of devil's advocate, strategics were a big factor last year, but the 2 biggest deals all time last year where Thoma Bravo taking out Proofpoint for $12.3 billion. And then we also had the consortium of Canada Pension Plan, and Permira and a whole bunch of others taking out McAfee for $12 billion.

But to your point, this is something I've really been paying attention to because I put out a spotlight report about a month ago on security M&A so far this year. And last year, year-to-date, at least as we look in terms of transaction volume, in other words, a number of deals, security M&A deals are actually up year-over-year by about 20%. However, the percentage of deals driven by private equity have really fallen off a cliff.

They're down from, as I said, just under 40% to now around 20%. And yes, you had the Barracuda deal, you mentioned. But certainly, that's something I'm keeping an eye on because, if that drops, then the question becomes who's going to step up to take the slack and, to your point, the absence of the Palo Altos and the Microsofts.

Another huge acquirer in security last year and the last few years, we believe, now has been HelpSystems, which is technically private equity-backed but is certainly a strategic acquirer. Just before this call, I did a quick scan of year-to-date security M&A transactions. And one of the things jumped out of me was I think 51 of the 89 deals year-to-date have been from nontraditional security acquirers. And quite honestly, there are a lot of smaller companies that I've never even heard of.

Eric Hanselman

So do these wind up being sort of tuck-in transactions? Is this -- I guess the thing I'm heading towards is are we looking at a significant change to the market and some of those dynamics.

Brenon Daly

Well, certainly, the overriding question every year at RSA is how are so many vendors still here, right? When I think about the...

Eric Hanselman

Well, I mean that let's take a quick step back at some of our background data, which is that what's the one place where budgets are increasing, information security. And that's a lot of fuel to keep this panoply of vendors alive, and maybe that's the thing that's keeping this whole thing moving, but I think I have a feel for where you're going with that. And somebody's got the hand on the edge of the rug.

Brenon Daly

It's well -- and it's just a simple -- I mean, I'm a markets guy. Like I am, that's the way I think about the world, unapologetic in that, by the way. But if I just look at a markets guy, Garrett referenced earlier, a banner year in terms of M&A volume, right? So forget about who's doing the deals, but just the sheer number, right?

So we're going to have about probably 200, 250 information security acquisitions here in 2022 250, right? That's on a base of 5,000 across all of technology and telco. And again, these are global numbers. So it's comprehensive measure activity, right? So it's a very, very small percentage.

Now yes, there are outsized valuations described in information security, always have been, probably always will be exactly because of what you referenced, Eric, around budgets, right? When our own research here from 451 Research suggest that 90% of IT folks tell us they have more money to spend in 2022 than they did in 2021, yes, that's going to draw a lot of participants.

But what's happened is it's drawn too many participants. So again, from a market perspective, think about it this way, think about the overpopulation around, so call it, 200, 250 acquisitions each year against inventory in terms of suppliers to the information security market. right, probably topping 4,000. I think I can probably put our heads together and certainly easily come up with 2,500 right?

So we're talking about a huge imbalance between the supply -- again, from a markets perspective, the supply, in other words, the number of vendors and the number of acquirers. And so ultimately, and that can last because you have -- as long as you have outside funding, you can get away with that. You can exist indefinitely with outside capital. Capital is oxygen. If you can get it from outside, you can stay alive.

But we all know venture capitaling is coming under pressure. You've got Sequoia. You got Y Combinator. You've got all of these venture firms sounding the alarm saying, "Hey, winter's coming. Tighten down, don't spend egregiously like you have been." So venture capital is going to get a lot harder to come by, which is going to accelerate this rationalization.

This imbalance is going to be less imbalanced, again, as this venture capital will no longer support unviable businesses. And they are in a host of 4,000 information security startups. There's a few that probably won't make it, and I'm going to go ahead and say.

Garrett Bekker

Yes. You hit the nail on the head. I mean this topic has come up over the last probably 4 or 5 years. We've talked about it, right? The one thing -- I think you totally hit the nail on head. The one thing that I've been most concerned about and keeping an eye on is the VC funding, right, because it's contributing to a number of things.

One, it's that overbalance or that oversupply of vendors, right? It's also driving the crazy valuations when you see companies like Lacework's knocking down a $1.3 billion D round or $543 million Series A from Transmit Security, right? I mean I'm old enough, I guess we all are, to remember, I got my start in this business -- as you guys know, I started as a sell-side equity in the early 2000s. And I literally got my first job in 2000.

So I basically arrived -- I missed most of the party and arrived for the hangover. And I barely had my feet wet before the dot-com bubble burst. And I remember distinctly back then how, like, companies went from overnight to, hey, we need more eyeballs to what do you mean eyeballs? We need profitability, son. And it was just -- it was really cruel to watch.

And to your point, I just talked to 2 companies. I know this is anecdotal, but just in the last couple of days, one who just completed a round; and another who is trying to raise around, and both told me like just in the last month, things have changed dramatically. So definitely something I'm keeping an eye on but that and also the private equity stuff. I think if the private equity as a driver of security M&A keeps trending downward, I think that's definitely going to have an impact.

Brenon Daly

Yes. And Garrett, let me just throw one other fact, Eric, and you appreciate this as we get ready to welcome RSA out here, obviously, in start-up land. So I went back just so we -- I think we can all agree [ pretty ] time on Wall Street for information security companies, whether it's SentinelOne, Okta, Zscaler, right? All of those are down 60%, 70%, 80%.

There's been a bear market, inarguably, for information security companies on Wall Street. So that's the public market. I went into Cap IQ and ran how many information security start-ups have raised $1 billion valuation funding here in this bear market so far year-to-date, right? And there's more than a dozen information security companies that, in the midst of this almost historic downturn right, they're able to become unicorns.

So you're talking about, obviously -- and this includes -- just to be clear, this includes existing unicorns, like Eric mentioned, Lacework, BigID, Axonius, right, already had their horn but got a step of valuation as well as sort of the new entrants like abnormal and material security, right? So again, this suggests a huge disconnect between value creation and value realization.

Just to put a point on that, if you go back and think about, okay, you're creating all these companies, information security companies, venture capital is creating all of these information security companies valued at north of $1 billion. How many have actually exited? And the answer is there hasn't been a single one since the last RSA show.

You have to go back all the way to March, right? Auth0 was the last venture-backed information security company to exit for more than $1 billion. Now they did it handsomely, $6.5 billion, but there's nothing since then. And meanwhile, we just continue to pile up. Again, this supply and demand imbalance in the market, it's true virtually for any pocket of technology, but it's just doubly true for information security.

Eric Hanselman

Well, as you said, I mean, maybe we should be thinking that winter is coming. Stay close to your dragons, right?

Garrett Bekker

So here's a little bit of the devil's advocate side to that, though. There's some reason for optimism. I've always looked back at security as being sort of a port in the storm and sort of a nondiscretionary spend and -- when times go bad. And again, I go back to -- I was starting back in 2000 going to the dot-com burst and then I remember living through the '07, '08, '09 great recession.

I think -- if you look at the public markets also in M&A volumes, in fact, if you look at our M&A knowledge base, we kind of flattened out. We had a little bit of a downturn like if you look '07, '08, but it wasn't as terrible as maybe as some other sectors. And I think there are some arguments to be made or there are some drivers in place that maybe can help this cycle -- down cycle fare better than the others.

And one of them is we're in the midst of this cloud migration, digital transformation, thing that I think is certainly fueling demand for security. And as Eric knows, one of the things that keeps security going and one of the reasons why we -- probably we have 4,000 vendors is my former esteemed colleague, Adrian, used to say it's a market of missing features, right? And as innovation comes along, it tends to open up new security problems that need to be solved.

And that so there's constant replenishing of the universe, right? We've also had this transition to work from home and work from anywhere, and I think that's still in place. We've also had a huge change. If you look compared to 20 years ago, security back then was still a little bit of a grudge spend. It hadn't caught on at the Board level. It was still one of those things where, hey, if we can avoid this, we will.

And if you look in the past 20 years, we've had PCI and Sarbanes-Oxley and HIPAA and, more recently, GDPR and CCPA in California. We've got new NIS guidelines, the executive order from Biden. So I think, clearly, this is security that is more of a nondiscretionary item that certainly got the attention of the Board more so than it did 12 years ago or 20 years ago.

Brenon Daly

Yes. I mean, certainly -- and the results, I mean, if you think about -- again, coming into RSA here, if you just look at the stock performance and a huge disconnect between the underlying financial performance of some of these companies, I mean, SentinelOne, its value has been evaporated, right? And it's still growing at 120%, right? So it is more than doubling revenue. There has slowdown associated with that.

Zscaler last night reported 60% growth, right? And how has Wall Street treated it as it's actually accelerated growth well. It's 2/3 of its value. So there's this huge disconnect, right? Palo Alto Networks is growing faster coming out of the recession than it was coming in substantially faster. It's also a 30% grower, right? I mean, Okta -- you just go down the list. Okta is growing. It's twice the size of SailPoint, growing twice as fast, and yet, it's valued at a lower price to sales multiple than SailPoint. It just doesn't make sense.

And so to your point, I think that overreaction, and Garrett's offering a ray of hope, and that's his role. My role is to bring the dour perspective. I have to also acknowledge that I mean Garrett is right. This not like -- these budget dollars are not going away. And we see that actually. I mean $20 billion of M&A spend, just back to my world, M&A spend, right, that's through the first 5 months of the year. That's higher than virtually any other year except last year.

So yes, we're going to have a little bit of a step-down overall here in 2022, but I don't want to mischaracterize it like it is still a booming market here for M&A. It's not going to be as booming as it was last year, but, hey, that's true for everywhere. But again, it is still -- again, we're already at -- we're going to -- we're already at the second highest annual spend in terms of M&A, and we still got the majority of the year to go.

Eric Hanselman

Brenon, a question for you. Yes, because as I mentioned earlier, year-to-date, if you just look at deal volume for cybersecurity, we're up about 20% year-over-year over last year, which is a low year. So, so far, it looks pretty good. The question is are we headed for that Wile Coyote moment where Wile Coyote's run off a cliff and he doesn't realize until he looks down and then he drops like a rock.

I mean do we have to worry about what are -- what's coming 2 or 3 quarters down the road? And what's sort of the canary in the coal mine? Like I remember, again, when I was starting out of Wall Street, when we knew things were bad was when we realized all the hardware vendors and software vendors, what percentage of their customers were dot-com companies that were about to go bankrupt. Is there anything like that you can think of this time around?

Brenon Daly

Well, I was back -- since we looking back on our stable careers, I was one of those companies that would prop up that bubble. I went to that. My company went public in January of 1990. I was a paper millionaire for a little bit there. We had one of the highest performing stocks on pop at the open, right? We were talking about a 500% gain on paper.

Eric Hanselman

Not too shabby.

Brenon Daly

yes. Of course, I'm still working. So obviously, I didn't have the foresight that Garrett had in seeing like, hey, the party is going to end. And so I guess -- and that's hence my cynicism a little bit. But I mean, to your point, Garrett, like I think there's been a little bit of a shift in the market.

So yes, I mean, if you look at who's doing the deals, okay, like HelpSystems yes, they're a corporate acquirer, but they're a private equity player, right? They've done a dozen deals in the last 2 years. They're the single busiest buyer. We've also seen -- think about like heavily funded information security companies that know they're going to make it.

It's turning around and buying those sort of maybe bits of technology, almost like an R&D play, like Devo, for example, out of Boston, right, that log management, they did their first transaction in history last -- I think in the last month, right? So we're starting to see -- and again, this is just opportunism. So I think that's -- so if we split the number of transactions versus the spending attached to them, okay, so number of transactions, I think we're safely going to shatter the record.

I think there's virtually no doubt that we will have more transactions than any year in history. It will be about twice where we were 5 years ago, about triple the number a decade ago. So that record much bank on that, again, because you've got new entrants, these heavily funded venture companies saying like, "Hey, it's the shopping time." Like we know we have a path to profitability, that fabled sort of path to profitability that everybody wants to see and suddenly really wants to see it in a downturn.

Hey, you're not going to keep burning $50 million a quarter indefinitely, right? Okay, if you're not going to do that, then you've earned the right to go take advantage of this opportunity in the market, and that's what it is. It is an opportunity. So I think you're going to see venture-backed companies, and you're going to see private equity-backed companies just get out the broom and start sweeping.

Garrett Bekker

I think, again, to some extent, it comes back to VC. And right now, at least what I've seen, the VC still seems to be flowing. I mean if you look at -- we're about a week ago, Wild Ventures just raised another $400 million fund focused strictly on security. So I think to some extent, as long as you keep seeing that going, that's going to keep proppiness in this industry up.

Brenon Daly

Yes. I mean when you think about just on Wild, I think his first fund was $60 million, maybe.

Garrett Bekker

Nice market if you can get it. I guess [indiscernible] for being successful, right?

Brenon Daly

Right. But again, like just imagine from the capital deployment perspective, right? $60 million, you can do it in a dozen checks probably. $400 million, I mean you're talking about a minimum 30, 35 checks that you have to write.

Garrett Bekker

Particularly if you're early stage, right?

Brenon Daly

Exactly.

Garrett Bekker

Lay around checks.

Brenon Daly

And add to that, you're having these dedicated infosec or cybersecurity venture funds, right? Their whole mandate is to basically fund in this sector. And they're all in the sort of hundreds of millions of dollars of funds. And obviously, there's some initial and then there's some follow-on capital, but that's a big pool.

And where I think the change is happening, though, and this is an important one, again from -- is that it's in that late stage, it isn't so much in the early stage, but it's in that late stage, particularly those crossover investors that were sort of positioning their portfolio. These are the Tigers and the GVs and M1s and those sort of that sort of cohort look to get sort of a position in a company before it went public.

And the way to do that was to get on the cap table in a sort of a growth around. Great. But now you think that sort of investment strategy has been undone by this bear market that we're seeing because what looked like easy money with this step-up valuation in an IPO, suddenly, an IPO was a down round. I mean, first of all, you can't get an IPO done. I mean nobody, nobody.

Garrett Bekker

No, as you just went public.

Brenon Daly

Yes. I mean it's happening. So you're not going to go public. So if you're a late-stage growth investor, right, suddenly, you've got the paper that you put in, and you thought you're going to flip it 6 months later at a 30%, 40% markup. Hey, that beats the broad market, and that's their comp. They're not investing like VCs. Their return threshold is not triple digits.

They'll beat the market and be happy with it, but they invested with this idea, hey, next stop, IPO and a pop, and we begin to sell out. That's not how they look at them now. So they're shifting and refocusing on what they do, and that's taken away that big slug of capital that was available to sloshing around out there for all these companies. So that's going to die down a little bit. But to your point, yes, I mean, as long as budget dollars -- as long as CISOs have more money to spend, they're going to be more companies like that's a full, that's a guarantee.

Eric Hanselman

Well, we're going to have to see you whether or not any of those checks get written as we roll into RSA. So time will tell.

Garrett Bekker

I did have one point to make on that real quickly, maybe we're bumping up against time. But again, looking back in my past cycles when we went through this is keep in mind, a lot of these budgets are set for see-saws. They're set at the beginning of the year, right?

And unless something materially changes, those are fairly set. So I think what may be interesting to see is potentially when the chickens come home to roost is in the beginning of 2023, when these budgets get reset and if they get set down a notch. But for right now, a lot of the budgets for this year, I think, have been allocated. So...

Eric Hanselman

Well, we will have to see because we are, in fact, out of time. I want to thank you both for a fascinating discussion, and we'll have to see how things shake out at RSA.

Brenon Daly

Terrific, Eric. Great to be back here with you.

Garrett Bekker

Yes. It was a lot of fun. Thanks for having us, Eric. Happy to do it any time, and thanks for -- everyone for tuning in.

Eric Hanselman

And that is it for this episode of Next in Tech. Thanks to our audience for staying with us. And thanks to our production team, including [ Caroline Wright ], Caterina Iacoviello, [ Ethan Zimman ], on the marketing events teams and our studio lead, [ Kyle Cangelosi ].

I hope that you'll join us for our next episode where we're going to be kicking off June and pride month with an episode on diversity and inclusion. I hope you'll join us then because there is always something Next in Tech.