Dec
13
2018
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NYC’s Work-Bench announces $47M enterprise investment fund

Work-Bench, an early-stage enterprise startup venture capital firm based in New York City, announced its $47 million Fund II today. It follows their initial $10 million fund.

Work-Bench is itself like a venture capital investment startup. A scrappy operation run by just five enterprise industry veterans, it defies convention in a number of ways, including setting up shop in New York City. While it’s based in New York, the company will invest anywhere in the country, writing checks for $1.5 million for Seed 2 and Series A investments.

Work-Bench’s philosophy centers around a sales approach and giving their startups entrée into some of the biggest companies in the country, many of which, not coincidentally, are based near their offices.

The company starts by trying to understand specific enterprise customer pain points, even before they send a founder in to pitch an executive. The startup founders are judged and guided by their ability to sell. In fact, one of the founders, Jonathan Lehr, says even before they invest in a company they will send them to pitch a couple of customers and take advantage of that two-way feedback channel as a way to understand the startup’s selling skills.

“Instead of starting with whiz-bang tech like a lot of West Coast VCs do, by starting with the problem and where budget dollars are being allocated, when we’re looking at companies from an investment perspective it really helps us connect all the dots a little a lot better. That’s because on the one hand the corporate executive is getting a solution to a pain point from the startup, and the startup founders are getting an introduction to the right stakeholder at the right time for them at the right organization,” Lehr told TechCrunch.

Work-Bench Team. Photo: Work-Bench

Work-Bench has set up their headquarters as space for hosting regular events that help introduce founders to key people in the community and learn about different subjects, such as writing a successful RFP, negotiating contracts and setting up a successful proof of concept (PoC). They also have work spaces where founders from the portfolio companies can interact on a daily basis and get direct feedback from the Work-Bench principals, who run a truly hands-on operation.

It seems to have worked. Among the enterprise startups funded with their initial fund were Dialpad, Tamr, Cockroach Labs and CoreOS, which was sold to Red Hat for $250 million in January. In all, they invested in 17 companies in the first fund.

The second fund is already under way with nine investments so far, including Scytale, a security and identity protocol startup; Algorithmia, which is working on DevOps for AI; and Catalyst, a customer success platform.

Fund II investors include co-anchors Industry Ventures and an unnamed Chicago family office. Corporate backers include Wipro, Schneider Electric and CA Technologies. Other investors include Fund I founders Craig Walker from Dialpad, Andy Palmer from Tamr and Tim Eades from vArmour.

Dec
12
2018
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Juniper Square lines up $25M for its real estate investment platform

Juniper Square, a four-year-old startup at the intersection of enterprise software, real estate and financial technology, has brought in an additional $25 million in Series B funding to fuel the growth of its commercial real estate investment platform. Ribbit Capital led the round, with participation from Felicis Ventures.

Founded in 2014 by Alex Robinson, Yonas Fisseha and Adam Ginsburg, the startup’s chief executive officer, vice president of engineering and VP of product, respectively, Juniper has raised a total of $33 million to date.

The company operates a software platform for commercial real estate investment firms — an industry that has been slower to adopt the latest and greatest technology. Robinson tells TechCrunch those firms raise money from pension funds, endowments and elsewhere to purchase and then manage commercial real estate, using Juniper’s software as a tool throughout that process. Juniper supports fundraising and capital management with a suite of customer relationship management (CRM) and productivity tools for its users.

The San Francisco-based company says it currently has hundreds of customers and manages half a trillion dollars in real estate.

“The private markets are just as big as the public markets … but the private markets have typically not been accessible to everyday investors, and that’s part of what we are trying to do with Juniper Square,” Robinson told TechCrunch. “It’s a tremendously large market that almost nobody knows anything about.”

Juniper will use its latest investment to double headcount from 60 to 120 in the year ahead, with plans to beef up its engineering, product and sales teams specifically as the company expects to continue experiencing massive growth. Robinson said it’s grown between 3x and 4x every year for the last three years.

Felicis Ventures managing director Sundeep Peechu said in a statement that Juniper “is one of the fastest growing real estate tech companies” the firm has ever seen: “They are building technology for an industry that touches nearly every human and every corner of the economy. It’s a hard problem that takes time to solve, but the benefits of making these huge markets work better are tremendous.”

Existing in a relatively niche intersection, Juniper’s job now is to prove itself more efficient and user-friendly than Microsoft Excel spreadsheets, which, Robinson says, are still its biggest competitor.

“Our goal is to be the de facto platform for real estate investment and we are well on our way to becoming that.”

Dec
11
2018
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Dell votes to buy back VMware tracking stock and go public again

Dell announced it has agreed to buy back the VMware tracking stock from the EMC acquisition. The company confirmed the buy-back price of $120 per share for a total of $23.9 billion. With today’s move, Dell will return to being publicly traded starting on December 28th.

Sixty-one percent of shareholders voted in favor of the deal. It’s unclear how Wall Street will deal with the $50 billion debt load the company is carrying as a result of that $67 billion EMC acquisition from two years ago, but chairman and CEO Michael Dell got the results he wanted.

“With this vote, we are simplifying Dell Technologies’ capital structure and aligning the interests of our investors,” Dell said in a statement.

A company spokesperson confirmed that Dell is going public again. “Portions of Dell Technologies have been publicly traded through, for example, VMware and the tracker stock. The NYSE:DELL Class C shares will enable investors to invest in the full breadth of Dell Technologies company.” In plain terms, that means the company will be sold on the New York Stock Exchange under the DELL symbol.

Part of the EMC deal was a payout to shareholders based on VMware tracking stock. VMware was a key part of the deal in that it was one of the more valuable pieces in the EMC federation of companies. It still runs as a separate company with separate stock listing.

There was much drama prior to this vote with activist investor Carl Icahn suing the company last month after Dell announced a price of $21.7 billion for the tracking stock last July. The move did get Dell to move the needle on the price a bit, although not as much as Icahn had hoped.

With today’s vote, Ray Wang, founder and principal analyst at Constellation Research, says the company is looking to move away from activist investors like Icahn and Elliott Management to more traditional institutional investors. “Michael Dell is attempting to rid his short-term activist shareholders for more mid- to long-term institutional types as he goes public again,” Wang explained.

As the company returns to the public markets, it means it is in the fairly unique position of going from public to private to public again. Dell originally went public in 1988 before taking the company private again in 2013 in a $24.4 billion buy-back.

At least one other company, Deltek, took a similar path over a decade ago. It eventually was sold to private equity firm Thoma Bravo for $1.1 billion in 2012 before being sold again in 2016 for $2.8 billion.

Nov
20
2018
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Our 3 favorite startups from Morgan Stanley’s 2nd Multicultural Innovation Lab Demo Day 

The Morgan Stanley Multicultural Innovation LabMorgan Stanley’s in-house accelerator focused on companies founded by multicultural and female entrepreneurs, hosted its second Annual Showcase and Demo Day. The event also featured companies from accelerators HearstLab, Newark Venture Partner Labs and PS27 Ventures. (Note: I was formerly employed by Morgan Stanley and have no financial ties.)

The showcase represented the culmination of the program’s second year, which followed an initial five-company class that has already seen two acquisitions. Through the six-month program, Morgan Stanley provides early-stage companies with a wide range of benefits, including an equity investment from Morgan Stanley, office space at Morgan Stanley headquarters, access to Morgan Stanley’s extensive network and others. Applications are now open for its third cohort of companies, with the application window closing on January 4th, 2019.

The 16 presenting startups, all led by a female or multicultural founder, offered solutions to structural inefficiencies across a wide array of categories, including fintech, developer tools and health. Though all of the companies offered impressive presentations and strong value propositions, here are three of the companies that stood out to us.

Hatch Apps

In hopes of democratizing software and app development, Hatch Apps provides a platform that allows users and companies to build iOS, Android and web applications without any code through pre-built templates and custom plug-and-play functions. In essence, Hatch Apps provides a solution for application building similar to what Squarespace or Wix provide for websites.

In the modern economy, every company is in one way or another a tech or tech-enabled company. Now the demand for strong engineers has made the fight for talent increasingly competitive and has made engineering quite costly, even when only needed for simple tasks. 

For an implementation and subscription fee, Hatch Apps allows companies with less sophisticated engineering DNA to reduce entering costs by launching native apps on their own, across platforms and often on faster timelines than those seen through third-party developers. Once an app is launched, Hatch Apps provides customers with detailed analytics and allows them to send targeted push notifications, export data and make in-app changes that can automatically go live in app stores.

The company initially took a bootstrapping approach to financing and raised funds by selling a 2016 election-themed “Cards Against Humanity”-style game created on the platform. Since then, Hatch Apps has already received funding from the Y Combinator Fellowship, Morgan Stanley and a number of other investors.

FreeWill

While estate planning is a topic many don’t like to think about, it’s a critical issue for managing cross-generational wealth. But will drafting can often be very complex, time-consuming and costly, requiring hours of legal consultation and coordination between various parties.

Founded by two former classmates at Stanford Business School, FreeWill looks to simplify the estate-planning process by providing a free online platform that automates will drafting, in a similar function to what TurboTax does for taxes. Using FreeWill, users can quickly set allocations for their estate and select personal recipients, charitable donations, executor specifications and other ancillary requests. The platform then creates a finalized legal document that is legally valid in all 50 states, to which users can also quickly make changes and replace without incurring expensive legal costs.

FreeWill is able to provide the platform to consumers for free due to the proceeds it receives from its nonprofit customers, who pay to be featured on the platform as a partner organization. FreeWill offers a compelling value proposition for partnering companies. By acting as a channel to funnel user donations to listed organizations, FreeWill has been able to drive a 600 percent increase in charitable giving to partner organizations on average. FreeWill also provides partner organizations with backing analytics that allow nonprofits to track bequests and donors through monthly reports. 

FreeWill currently boasts an impressive roster of 75 paying nonprofit partners that include American Red Cross, Amnesty International and many others. In the long-run it hopes to be the go-to solution for financial and legal end-of-life planning for investment advisors, life insurance and employee benefits providers.

Shoobs

Shoobs is looking to be the go-to platform for local “urban” events, which the company defined as events centered on local nightlife, comedy and concerts in the hip-hop, R&B and reggae genres to name a few. But unlike the genre-agnostic, transaction-focused event management platforms that can make the space seem pretty crowded, Shoobs focused on providing genre-specific even discovery. Shoobs matches urban event goers with artists of their choice and related smaller-scale events that can be harder to discover, acting as a form of curation, quality control and discovery.

For event organizers, Shoobs helps provide digital ticketing and promotion services, with event recommendation capabilities that target the most promising potential customers. Through its offering to event organizers, Shoobs is able to monetize its services through ticket sale commission, advertising and brand partnerships.

Since its initial launch in London, Shoobs notes it has become one of the top urban events platforms in the city, with an extensive base of recurring registered users and event organizers. After previously working with AEG for its London launch, Shoobs is looking to expand stateside with the help of organizers like Live Nation. Shoobs joins a long list of promising Y Combinator alumni companies with YC also acting as one of Shoobs’ initial investors.

Other presenting companies included:

Morgan Stanley Multicultural Innovation Lab

  • BeautyLynk “is an on-demand hair and makeup service provider, specializing in customizable services for women.”
  • Broadway Roulette “is an events marketplace that pairs consumers with surprise cultural events, beginning with Broadway theater.”
  • CariClub “is an enterprise software platform to connect young professionals with nonprofit opportunities.”
  • COI Energy Services “is an integrated platform for electric utilities and business users to optimize and manage energy usage.”
  • CoSign “is an API and application that allows anyone to create, distribute and monetize visual content.”
  • Goalsetter “is a goals-based gifting, savings and investing platform designed for children.”
  • myLAB Box “offers customizable at-home health-test kits and relevant telemedicine consultations / prescription services.”

HearstLab

  • Priori “is a global legal marketplace changing the way in-house teams find, hire and manage outside counsel.”
  • TRENCH “is an online fashion marketplace that makes use of the unworn items in every woman’s closet.”

Newark Venture Partners Labs

  • Floss Bar “is a new type of preventive brand for oral health care. The company offers high-quality, routine dental care across flexible locations at thoughtful prices.”
  • Upsider “is a software solution allowing recruiters to leverage AI technology to identify a comprehensive set of candidates who align with their business and role requirements, resulting in a more strategic understanding of the best possible talent for the job.”

PS27 Ventures

  • BlueWave Technologies “is a cleantech company and the creators of the BlueWave™ Cleaning System — a water-free, detergent-free and chemical-free plasma device that cleans items that are extremely hard or impossible to clean with a washer and dryer.”
  • OnPay Solutions “focuses exclusively on business-to-business payments. They create payment software and offer payment web services to enhance efficiency and productivity for Accounts Payable and Accounts Receivable.”

Nov
13
2018
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Cognigo raises $8.5M for its AI-driven data protection platform

Cognigo, a startup that aims to use AI and machine learning to help enterprises protect their data and stay in compliance with regulations like GDPR, today announced that it has raised an $8.5 million Series A round. The round was led by Israel-based crowdfunding platform OurCrowd, with participation from privacy company Prosegur and State of Mind Ventures.

The company promises that it can help businesses protect their critical data assets and prevent personally identifiable information from leaking outside of the company’s network. And it says it can do so without the kind of hands-on management that’s often required in setting up these kinds of systems and managing them over time. Indeed, Cognigo says that it can help businesses achieve GDPR compliance in days instead of months.

To do this, the company tells me, it’s using pre-trained language models for data classification. That model has been trained to detect common categories like payslips, patents, NDAs and contracts. Organizations can also provide their own data samples to further train the model and customize it for their own needs. “The only human intervention required is during the systems configuration process, which would take no longer than a single day’s work,” a company spokesperson told me. “Apart from that, the system is completely human-free.”

The company tells me that it plans to use the new funding to expand its R&D, marketing and sales teams, all with the goal of expanding its market presence and enhancing awareness of its product. “Our vision is to ensure our customers can use their data to make smart business decisions while making sure that the data is continuously protected and in compliance,” the company tells me.

Nov
12
2018
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Enterprise shopping season starts early with almost $50B in recent deals

Black Friday may still be 10 days away, but shopping season started early in the enterprise this year. We have seen acquisitions totaling almost $50 billion in the last couple of months alone, topped by the mega $34 billion IBM-Red Hat deal two weeks ago. What exactly is going on here?

While not every deal has been for that kind of money, we are seeing an unusually large number of mega deals this year, something that some folks were predicting would happen when the big tech companies were allowed to repatriate their money as part of last year’s tax deal.

Let’s look at some of the multi-billion deals we have seen so far this year:

Supply and demand

Big companies are opening their checkbooks in a big way right now, buying everything from marketing to analytics to security companies. They are grabbing open source and proprietary. They are looking at ways to bridge the cloud and on-prem. There is a whole host of software and not much rhyme or reason across the deals.

What they have in common is that they are enormous offers that are simply too huge to refuse. These companies flush with cash see opportunities to fill holes, and they are going for one piece after another.

One of the reasons the prices are going so high is that there is a limited number of companies available to buy, and that is driving up the price, says Ray Wang, founder and principal analyst at Constellation Research. As he sees it, there are only 3-5 decent players per category right now. He compares that with 10 years ago when we were seeing 10-15 players per category. With a limited number of viable startups, companies seem to be going after these companies harder. Combine that with fat wallets full of cash, and you suddenly have this wave of super-sized deals.

The companies being acquired by large organizations can justify selling in the usual ways. They can reward shareholders and investors. These larger organizations allow them to push their product roadmaps much more quickly than they could on their own. They give them access to international markets and mega sales teams.

Buy versus build

Still, companies have been spending unusually large sums for relatively small amounts of revenue. In deals over the last three weeks, we have seen IBM pay $34 billion for a company with around $3 billion in revenue. We saw SAP paying $8 billion for a mere $400 million in revenue.

This certainly seems on its face to be a massive overpay, but Constellation’s Wang says ultimately this often comes down to a classic build versus buy decision. SAP could build a similar product to Qualtrics, or they could simply buy it and put the massive SAP salesforce to bear on it. “SAP can sell into 100,000 customers. They only have a 10 percent overlap with Qualtrics. The numbers work, and it beats taking a new product to market,” Wang told TechCrunch.

Wang believes this could be the strategy behind many of these acquisitions, while admitting that the numbers sound a bit crazy. As he says, the formula used to be three times, three years trailing revenues. Now it’s 15-20 times. While those may be hard numbers to justify, he believes it’s a win-win for buyer and acquired — and investors win big too, of course.

Staying the course

In many instances like Red Hat, GitHub and Qualtrics, the companies will likely remain separate, independent units inside the larger organization, at least for the time being, while looking for meaningful crossover inside the larger company when it makes sense.

But Tony Byrne, founder and principal analyst at Real Story Group, says these large companies tend to listen to Wall Street, and customers should be wary of what they hear when it comes to their favorite products and services. “You cannot trust the initial pleasantries about continuity that come out of the first press release. These are huge vendors that listen first and foremost to Wall Street. If there’s an offering that doesn’t totally align with their story to investors, it is not going to get much love and is at risk for getting eliminated or calved off,” Byrne explained.

It’s also hard to know how well two companies are going to fit together until the deal actually closes. Sometimes the acquiring company doesn’t know what they have or how to sell it. Sometimes the two companies don’t fit well together or the founders or key executives don’t fit smoothly into the new hierarchy. They try to figure this all out beforehand, but it’s not always easy to know how it will play out in reality.

Regardless, we are seeing an unusually high level of massive acquisitions, and chances are, there are more coming.

Oct
25
2018
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Daily Crunch: Tesla is profitable again

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here:

1. Tesla earns its first profit in two years

Tesla reported a profit in the third quarter, reversing seven consecutive quarters of losses. This is only the third time in the company’s history that it has achieved this milestone.

The turnaround was driven by sales of the Model 3. The company said customers are trading up their relatively cheaper vehicles to buy a Model 3, even though there is not yet a leasing option and the starting price was $49,000.

2. Trump has two ‘secure’ iPhones, but the Chinese are still listening

A new report by The New York Times puts a spotlight on the president’s array of devices and how he uses them. However, both Trump and a spokesperson for China’s foreign ministry have denied the story.

(BRENDAN SMIALOWSKI/AFP/Getty Images)

3. Red Dead Redemption 2 sets the bar high for the next generation of open world games

Tomorrow, Red Dead Redemption 2 goes live after months of breathless speculation. And according to Devin Coldewey and Jordan Crook, it’s as good as you’ve been hoping.

4. Facebook is building Lasso, a video music app to steal TikTok’s teens

Facebook is building a standalone product where users can record and share videos of themselves lip syncing or dancing to popular songs, according to information from current and former employees.

5. One-year-old Ribbon raises $225m to remove the biggest stress of home buying

The startup wants to replace the incredible stress of securing a mortgage during the home-buying process with a Ribbon Offer: If a buyer can’t secure a mortgage in time for close, Ribbon will pay for the house itself and give the buyer extra time to get financing.

6. Twitter beats Wall St Q3 estimates with $758M in revenue

Twitter reported a 29 percent increase in ad revenue to $650 million, and the company says total ad engagements increased 50 percent year over year. However, user growth didn’t quite match expectations.

7. Confirmed: ShopRunner acquires Spring, raises $40M

ShopRunner is announcing its first infusion of venture funding under CEO Sam Yagan, plus an acquisition of the shopping app Spring. Sources also say it’s readying a major overhaul of its mobile app.

Oct
12
2018
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Anaplan hits the ground running with strong stock market debut up over 42 percent

You might think that Anaplan CEO, Frank Calderoni would have had a few sleepless nights this week. His company picked a bad week to go public as market instability rocked tech stocks. Still he wasn’t worried, and today the company had by any measure a successful debut with the stock soaring up over 42 percent. As of 4 pm ET, it hit $24.18, up from the IPO price of $17. Not a bad way to launch your company.

Stock Chart: Yahoo Finance

“I feel good because it really shows the quality of the company, the business model that we have and how we’ve been able to build a growing successful business, and I think it provides us with a tremendous amount of opportunity going forward,” Calderoni told TechCrunch.

Calderoni joined the company a couple of years ago, and seemed to emerge from Silicon Valley central casting as former CFO at Red Hat and Cisco along with stints at IBM and SanDisk. He said he has often wished that there were a tool around like Anaplan when he was in charge of a several thousand person planning operation at Cisco. He indicated that while they were successful, it could have been even more so with a tool like Anaplan.

“The planning phase has not had much change in in several decades. I’ve been part of it and I’ve dealt with a lot of the pain. And so having something like Anaplan, I see it’s really being a disrupter in the planning space because of the breadth of the platform that we have. And then it goes across organizations to sales, supply chain, HR and finance, and as we say, really connects the data, the people and the plan to make for better decision making as a result of all that,” he said.

Calderoni describes Anaplan as a planning and data analysis tool. In his previous jobs he says that he spent a ton of time just gathering data and making sure they had the right data, but precious little time on analysis. In his view Anaplan, lets companies concentrate more on the crucial analysis phase.

“Anaplan allows customers to really spend their time on what I call forward planning where they can start to run different scenarios and be much more predictive, and hopefully be able to, as we’ve seen a lot of our customers do, forecast more accurately,” he said.

Anaplan was founded in 2006 and raised almost $300 million along the way. It achieved a lofty valuation of $1.5 billion in its last round, which was $60 million in 2017. The company has just under 1000 customers including Del Monte, VMware, Box and United.

Calderoni says although the company has 40 percent of its business outside the US, there are plenty of markets left to conquer and they hope to use today’s cash infusion in part to continue to expand into a worldwide company.

Oct
11
2018
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Zuora partners with Amazon Pay to expand subscription billing options

Zuora, the SaaS company helping organizations manage payments for subscription businesses, announced today that it had been selected as a Premier Partner in the Amazon Pay Global Partner Program. 

The “Premier Partner” distinction means businesses using Zuora’s billing platform can now easily integrate Amazon’s digital payment system as an option during checkout or recurring payment processes. 

The strategic rationale for Zuora is clear, as the partnership expands the company’s product offering to prospective and existing customers.  The ability to support a wide array of payment methodologies is a key value proposition for subscription businesses that enables them to service a larger customer base and provide a more seamless customer experience.

It also doesn’t hurt to have a deep-pocketed ally like Amazon in a fairly early-stage industry.  With omnipotent tech titans waging war over digital payment dominance, Amazon has reportedly doubled down on efforts to spread Amazon Pay usage, cutting into its own margins and offering incentives to retailers.

As adoption of Amazon Pay spreads, subscription businesses will be compelled to offer the service as an available payment option and Zuora should benefit from supporting early billing integration.

For Amazon Pay, teaming up with Zuora provides direct access to Zuora’s customer base, which caters to tens of millions of subscribers. 

With Zuora minimizing the complexity of adding additional payment options, which can often disrupt an otherwise unobtrusive subscription purchase experience, the partnership with Zuora should help spur Amazon Pay adoption and reduce potential friction.

“By extending the trust and convenience of the Amazon experience to Zuora, merchants around the world can now streamline the subscription checkout experience for their customers,” said Vice President of Amazon Pay, Patrick Gauthier.  “We are excited to be working with Zuora to accelerate the Amazon Pay integration process for their merchants and provide a fast, simple and secure payment solution that helps grow their business.”

The world subscribed

The collaboration with Amazon Pay represents another milestone for Zuora, which completed its IPO in April of this year and is now looking to further differentiate its offering from competing in-house systems or large incumbents in the Enterprise Resource Planning (ERP) space, such as Oracle or SAP.   

Going forward, Zuora hopes to play a central role in ushering a broader shift towards a subscription-based economy. 

Tien Tzuo, founder and CEO of Zuora, told TechCrunch he wants the company to help businesses first realize they should be in the subscription economy and then provide them with the resources necessary to flourish within it.

“Our vision is the world subscribed.”  said Tzuo. “We want to be the leading company that has the right technology platform to get companies to be successful in the subscription economy.”

The partnership will launch with publishers “The Seattle Times” and “The Telegraph”, with both now offering Amazon Pay as a payment method while running on the Zuora platform.

Oct
02
2018
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NYC wants to build a cyber army

Empires rise and fall, and none more so than business empires. Whole industries that once dominated the planet are just a figment in memory’s eye, while new industries quietly grow into massive behemoths.

New York City has certainly seen its share of empires. Today, the city is a global center of finance, real estate, legal services, technology, and many, many more industries. It hosts the headquarters of roughly 10% of the Fortune 500, and the metro’s GDP is roughly equivalent to that of Canada.

So much wealth and power, and all under constant attack. The value of technology and data has skyrocketed, and so has the value of stealing and disrupting the services that rely upon it. Cyber crime and cyber wars are adding up: according to a report published jointly between McAfee and the Center for Strategic and International Studies, the costs of these operations are in the hundreds of billions of dollars – and New York’s top industries such as financial services bear the brunt of the losses.

Yet, New York City has hardly been a bastion for the cybersecurity industry. Boston and Washington DC are far stronger today on the Acela corridor, and San Francisco and Israel have both made huge impacts on the space. Now, NYC’s leaders are looking to build a whole new local empire that might just act as a bulwark for its other leading ecosystems.

Today, the New York City Economic Development Corporation (NYCEDC) announced the launch of Cyber NYC, a $30 million “catalyzing” investment designed to rapidly grow the city’s ecosystem and infrastructure for cybersecurity.

James Patchett, CEO of New York City Economic Development Corporation. (Photo from NYCEDC)

James Patchett, CEO of NYCEDC, explained in an interview with TechCrunch that cybersecurity is “both an incredible opportunity and also a huge threat.” He noted that “the financial industry has been the lifeblood of this city for our entire history,” and the costs of cybercrime are rising quickly. “It’s a lose-lose if we fail to invest in the innovation that keeps the city strong” but “it’s a win if we can create all of that innovation here and the corresponding jobs,” he said.

The Cyber NYC program is made up of a constellation of programs:

  • Partnering with Jerusalem Venture Partners, an accelerator called Hub.NYC will develop enterprise cybersecurity companies by connecting them with advisors and customers. The program will be hosted in a nearly 100,000 square foot building in SoHo.
  • Partnering with SOSA, the city will create a new, 15,000 square foot Global Cyber Center co-working facility in Chelsea, where talented individuals in the cyber industry can hang out and learn from each other through event programming and meetups.
  • With Fullstack Academy and Laguardia Community College, a Cyber Boot Camp will be created to enhance the ability of local workers to find jobs in the cybersecurity space.
  • Through an “Applied Learning Initiative,” students will be able to earn a “CUNY-Facebook Master’s Degree” in cybersecurity. The program has participation from the City University of New York, New York University, Columbia University, Cornell Tech, and iQ4.
  • With Columbia University’s Technology Ventures, NYCEDC will introduce a program called Inventors to Founders that will work to commercialize university research.

NYCEDC’s map of the Cyber NYC initiative. (Photo from NYCEDC)

In addition to Facebook, other companies have made commitments to the program, including Goldman Sachs, MasterCard, PricewaterhouseCoopers, and edX.org. Two Goldman execs, Chief Operational Risk Officer Phil Venables and Chief Information Security Officer Andy Ozment, have joined the initiative’s advisory boards.

The NYCEDC estimates that there are roughly 6,000 cybersecurity professionals currently employed in New York City. Through these programs, it estimates that the number could increase by another 10,000. Patchett said that “it is as close to a no-brainer in economic development because of the opportunity and the risk.”

From Jerusalem to New York

To tackle its ambitious cybersecurity goals, the NYCEDC is partnering with two venture firms, Jerusalem Venture Partners (JVP) and SOSA, with significant experience investing, operating, and growing companies in the sector.

Jerusalem-based JVP is an established investor that should help founders at Hub.NYC get access to smart capital, sector expertise, and the entrepreneurial experience needed to help their startups scale. JVP invests in early-, late-, and growth-stage companies focused on cybersecurity, big data, media, and enterprise software.

JVP will run Hub.NYC, a startup accelerator that will help cybersecurity startups connect with customers and mentors. (Photo from JVP)

Erel Margalit, who founded the firm in 1993, said that “If you look at what JVP has done … we create ecosystems.” Working with Jerusalem’s metro government, Margalit and the firm pioneered a number of institutions such as accelerators that turned Israel into an economic powerhouse in the cybersecurity industry. His social and economic work eventually led him to the Knesset, Israel’s unicameral legislature, where he served as an MP from 2015-2017 with the Labor Party.

Israel is a very small country with a relative dearth of large companies though, a huge challenge for startups looking to scale up. “Today if you want to build the next-generation leading companies, you have to be not only where the ideas are being brewed, but also where the solutions are being [purchased],” Margalit explained. “You need to be working with the biggest customers in the world.”

That place, in his mind, is New York City. It’s a city he has known since his youth – he worked at Moshe’s Moving IN NYC while attending Columbia as a grad student where he got his PhD in philosophy. Now, he can pack up his own success from Israel and scale it up to an even larger ecosystem.

Since its founding, JVP has successfully raised $1.1 billion across eight funds, including a $60 million fund specifically focused on the cybersecurity space. Over the same period, the firm has seen 32 successful exits, including cybersecurity companies CyberArk (IPO in 2014) and CyActive (Acquired by PayPal in 2013).

JVP’s efforts in the cybersecurity space also go beyond the investment process, with the firm recently establishing an incubator, known as JVP Cyber Labs, specifically focused on identifying, nurturing and building the next wave of Israeli cybersecurity and big data companies.

On average, the firm has focused on deals in the $5-$10 million range, with a general proclivity for earlier-stage companies where the firm can take a more hands-on mentorship role. Some of JVP’s notable active portfolio companies include Source Defense, which uses automation to protect against website supply chain attacks, ThetaRay, which uses big data to analyze threats, and Morphisec, which sells endpoint security solutions.

Opening up innovation with SOSA

The self-described “open-innovation platform,” SOSA is a global network of corporations, investors, and entrepreneurs that connects major institutions with innovative startups tackling core needs.

SOSA works closely with its partner startups, providing investor sourcing, hands-on mentorship and the physical resources needed to achieve growth. The group’s areas of expertise include cybersecurity, fintech, automation, energy, mobility, and logistics. Though headquartered in Tel Aviv, SOSA recently opened an innovation lab in New York, backed by major partners including HP, RBC, and Jefferies.

With the eight-floor Global Cyber Center located in Chelsea, it is turning its attention to an even more ambitious agenda. Uzi Scheffer, CEO of SOSA, said to TechCrunch in a statement that “The Global Cyber Center will serve as a center of gravity for the entire cybersecurity industry where they can meet, interact and connect to the finest talent from New York, the States, Israel and our entire global network.”

SOSA’s new building in Chelsea will be a center for the cybersecurity community (Photo from SOSA)

With an already established presence in New York, SOSA’s local network could help spur the local corporate participation key to the EDC’s plan, while SOSA’s broader global network can help achieve aspirations of turning New York City into a global cybersecurity leader.

It is no coincidence that both of the EDC’s venture partners are familiar with the Israeli cybersecurity ecosystem. Israel has long been viewed as a leader in cybersecurity innovation and policy, and has benefited from the same successful public-private sector coordination New York hopes to replicate.

Furthermore, while New York hopes to create organic growth within its own local ecosystem, the partnerships could also benefit the city if leading Israeli cybersecurity companies look to relocate due to the limited size of the Israeli market.

Big plans, big results?

While we spent comparatively less time discussing them, the NYCEDC’s educational programs are particularly interesting. Students will be able to take classes at any university in the five-member consortium, and transfer credits freely, a concept that the NYCEDC bills as “stackable certificates.”

Meanwhile, Facebook has partnered with the City University of New York to create a professional master’s degree program to train up a new class of cybersecurity leaders. The idea is to provide a pathway to a widely-respected credential without having to take too much time off of work. NYCEDC CEO Patchett said, ”you probably don’t have the time to take two years off to do a masters program,” and so the program’s flexibility should provide better access to more professionals.

Together, all of these disparate programs add up to a bold attempt to put New York City on the map for cybersecurity. Talent development, founder development, customer development – all have been addressed with capital and new initiatives.

Will the community show up at initiatives like the Global Cyber Center, pictured here? (Photo from SOSA)

Yet, despite the time that NYCEDC has spent to put all of these partners together cohesively under one initiative, the real challenge starts with getting the community to participate and build upon these nascent institutions. “What we hear from folks a lot of time,” Patchett said to us, is that “there is no community for cyber professionals in New York City.” Now the buildings have been placed, but the people need to walk through the front doors.

The city wants these programs to be self-sustaining as soon as possible. “In all cases, we don’t want to support these ecosystems forever,” Patchett said. “If we don’t think they’re financially sustainable, we haven’t done our job right.” He believes that “there should be a natural incentive to invest once the ecosystem is off the ground.”

As the world encounters an ever-increasing array of cyber threats, old empires can falter – and new empires can grow. Cybersecurity may well be one of the next great industries, and it may just provide the needed defenses to ensure that New York City’s other empires can live another day.

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