Apr
17
2019
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The Exit: an AI startup’s McPivot

Five years ago, Dynamic Yield was courting an investment from The New York Times as it looked to shift how publishers paywalled their content. Last month, Chicago-based fast food king McDonald’s bought the Israeli company for $300 million, a source told TechCrunch, with the purpose of rethinking how people order drive-thru chicken nuggets.

The pivot from courting the grey lady to the golden arches isn’t as drastic as it sounds. In a lot of ways, it’s the result of the company learning to say “no” to certain customers. At least, that’s what Bessemer’s Adam Fisher tells us.

The Exit is a new series at TechCrunch. It’s an exit interview of sorts with a VC who was in the right place at the right time but made the right call on an investment that paid off. 

Fisher

Fisher was Dynamic Yield founder Liad Agmon’s first call when he started looking for funds from institutional investors. Bessemer bankrolled the bulk of a $1.7 million funding round which valued the startup at $5 million pre-money back in 2013. The firm ended up putting about $15 million into Dynamic Yield, which raised ~$85 million in total from backers including Marker Capital, Union Tech Ventures, Baidu and The New York Times.

Fisher and I chatted at length about the company’s challenging rise and how Israel’s tech scene is still being underestimated. Fisher has 11 years at Bessemer under his belt and 14 exits including Wix, Intucell, Ravello and Leaba.

The interview has been edited for length and clarity. 


Saying “No”

Lucas Matney: So, right off the bat, how exactly did this tool initially built for publishers end up becoming something that McDonalds wanted?

Adam Fisher: I mean, the story of Dynamic Yield is unique. Liad, the founder and CEO, he was an entrepreneur in residence in our Herzliya office back in 2011. I’d identified him earlier from his previous company, and I just said, ‘Well, that’s the kind of guy I’d love to work with.’ I didn’t like his previous company, but there was something about his charisma, his technology background, his youth, which I just felt like “Wow, he’s going to do something interesting.” And so when he sold his previous company, coincidentally to another Chicago based company called Sears, I invited him and I think he found it very flattering, so he joined us as an EIR.

And really only at the very end of his residence did he come up with this idea that would become Dynamic Yield. He came about it very much focused on the problem he saw with publishers being outwitted by ad buyers. He felt like all the big publishers really didn’t understand their digital businesses, didn’t understand their users, didn’t understand how performance ad buying was working, and he began to build a product that could dynamically optimize a publisher’s website to maximize revenue, hence the yield … the dynamic yield.

But very quickly, we told him, ‘That’s interesting, but we’re not sure how big that market is. And, you know it’s not always great to sell to those kind of weak customers. Sometimes they’re weak for a reason.’

Apr
17
2019
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Airbase launches with $7M Series A to simplify spending control systems

Airbase is a startup with a plan to change the way you think about accounting around spending. Instead of multiple workflows, it wants to create a simpler one involving, well, Airbase. It’s a bold move for any startup to take on something as entrenched as financials, but it’s giving it a shot, and today the company launched with a $7 million Series A investment.

First Round Capital was lead investor. Maynard Webb, Village Global, BoxGroup and Quiet Capital also participated. The deal closed at the end of November last year. This is the first external funding for the company, which company founder and CEO Thejo Kote had bootstrapped previously with $300,000 of his own money.

“At a high level, Airbase is the first all-in-one spend management system. It replaces a number of different systems that companies use to manage how they spend money,” Kote told TechCrunch.

He knows of what he speaks. Prior to starting this company, Kote co-founded Automatic, a startup that he sold to SiriusXM for more than $100 million in 2017. As a founder, he saw just how difficult it was to track the vast variety of spending inside a company, from supplies to subscriptions to food and drink.

“Think about the hundreds of things that companies spend money on, and the way in which the management of that happens is a pretty broken process today,” he said. For starters, it usually involves some sort of approval request in a tool like Slack, Jira or Google forms.

Once approved, the person requesting the expense will put that on a company credit card, then have to submit expense reports at the end of each month using a tool like Expensify. If you purchase from a vendor, then that involves an invoice and that has to be processed and paid. Finally it would need to be reconciled and accounted for in accounting software. Each step of this process ends up being time-consuming and costly for an organization.

Kote’s idea was to take this process and streamline it by removing the friction, which he saw as being related to the disparate systems in place to get the work done. He believed by creating a single workflow on a unified, single platform he could create a smoother system for everyone involved.

He is putting that single system between the bank and the accounting system, including a virtual Airbase Visa card to take the place of physical cards. Request for spending happens inside Airbase instead of an external tool. When the virtual card gets charged, bookkeeping and reconciliation gets handled in Airbase and pushed to your accounting package of choice.

Airbase workflow. Diagram: Airbase

This could be a difficult proposition for companies with existing systems in place, but could be attractive to startups and small companies whose accounting systems have not yet hardened. Perhaps that’s why most of Airbase’s customers are startups or SMBs with between 500 and 5,000 employees, such as Gusto, Netlify and Segment.

Bill Trenchard, general partner at lead investor First Round Capital, says he has seen very little innovation in this space and that’s what drew him to Airbase. “Airbase has taken a bold step forward to create an entirely new paradigm. It delivers a real solution to the biggest problems finance teams face as their companies grow,” Trenchard said in a statement.

The company was founded in 2017 and has 22 employees. It has a sales office in San Francisco, but other employees are spread across four countries.

Apr
11
2019
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Armis nabs $65M Series C as IoT security biz grows in leaps and bounds

Armis is helping companies protect IoT devices on the network without using an agent, and it’s apparently a problem that is resonating with the market, as the startup reports 700 percent growth in the last year. That caught the attention of investors, who awarded them a $65 million Series C investment to help keep accelerating that growth.

Sequoia Capital led the round with help from new investors Insight Venture Partners and Intermountain Ventures. Returning investors Bain Capital Ventures, Red Dot Capital Partners and Tenaya Capital also participated. Today’s investment brings the total raised to $112 million, according to the company.

The company is solving a hard problem around device management on a network. If you have devices where you cannot apply an agent to track them, how do you manage them? Nadir Izrael, company co-founder and CTO, says you have to do it very carefully because even scanning for ports could be too much for older devices and they could shut down. Instead, he says that Armis takes a passive approach to security, watching and learning and understanding what normal device behavior looks like — a kind of behavioral fingerprinting.

“We observe what devices do on the network. We look at their behavior, and we figure out from that everything we need to know,” Izrael told TechCrunch. He adds, “Armis in a nutshell is a giant device behavior crowdsourcing engine. Basically, every client of Armis is constantly learning how devices behave. And those statistical models, those machine learning models, they get merged into master models.”

Whatever they are doing, they seem to have hit upon a security pain point. They announced a $30 million Series B almost exactly a year ago, and they went back for more because they were growing quickly and needed the capital to hire people to keep up.

That kind of growth is a challenge for any startup. The company expects to double its 125-person work force before the end of the year, but the company is working to put systems in place to incorporate those new people and service all of those new customers.

The company plans to hire more people in sales and marketing, of course, but they will concentrate on customer support and building out partnership programs to get some help from systems integrators, ISVs and MSPs, who can do some of the customer hand-holding for them.

Apr
10
2019
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The right way to do AI in security

Artificial intelligence applied to information security can engender images of a benevolent Skynet, sagely analyzing more data than imaginable and making decisions at lightspeed, saving organizations from devastating attacks. In such a world, humans are barely needed to run security programs, their jobs largely automated out of existence, relegating them to a role as the button-pusher on particularly critical changes proposed by the otherwise omnipotent AI.

Such a vision is still in the realm of science fiction. AI in information security is more like an eager, callow puppy attempting to learn new tricks – minus the disappointment written on their faces when they consistently fail. No one’s job is in danger of being replaced by security AI; if anything, a larger staff is required to ensure security AI stays firmly leashed.

Arguably, AI’s highest use case currently is to add futuristic sheen to traditional security tools, rebranding timeworn approaches as trailblazing sorcery that will revolutionize enterprise cybersecurity as we know it. The current hype cycle for AI appears to be the roaring, ferocious crest at the end of a decade that began with bubbly excitement around the promise of “big data” in information security.

But what lies beneath the marketing gloss and quixotic lust for an AI revolution in security? How did AL ascend to supplant the lustrous zest around machine learning (“ML”) that dominated headlines in recent years? Where is there true potential to enrich information security strategy for the better – and where is it simply an entrancing distraction from more useful goals? And, naturally, how will attackers plot to circumvent security AI to continue their nefarious schemes?

How did AI grow out of this stony rubbish?

The year AI debuted as the “It Girl” in information security was 2017. The year prior, MIT completed their study showing “human-in-the-loop” AI out-performed AI and humans individually in attack detection. Likewise, DARPA conducted the Cyber Grand Challenge, a battle testing AI systems’ offensive and defensive capabilities. Until this point, security AI was imprisoned in the contrived halls of academia and government. Yet, the history of two vendors exhibits how enthusiasm surrounding security AI was driven more by growth marketing than user needs.

Apr
08
2019
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Fleetsmith lands $30M Series B to grow Apple device management platform

Fleetsmith launched in 2016 with a mission to manage Apple devices in the cloud. It simplified an IT activity that had previously been complex, with help from Apple’s Device Enrollment Program. Over the last year, the startup has beefed up its offering considerably, and today it announced a $30 million Series B round led by Menlo Ventures.

Tiger Global Management, Upfront Ventures and Harrison Metal also participated. Under the terms of the deal, Naomi Pilosof Ionita, a partner at Menlo, will join the company board. Her colleague Matt Murphy will become a board observer. With today’s announcement, the startup has now raised more than $40 million, according to data supplied by the company.

Company co-founder and CEO Zack Blum says the original mission was about solving a pain point he and his co-founders were feeling around finding a modern approach to managing Apple devices. “From a customer perspective, they can ship devices directly to their employees. The employee unwraps it, connects to Wi-Fi and the device is enrolled automatically in Fleetsmith,” Blum explained.

He says that this automated approach, combined with the product’s security and intelligence capabilities, means that IT doesn’t have to worry about devices being registered and up-to-date, regardless of where an employee happens to be in the world.

It has moved from solving that problem for SMBs to having a broader mission for companies of all sizes, especially those with distributed work forces, which can benefit from enrolling in this automated fashion from anywhere. Once enrolled, companies can push security updates to all of the company’s employees and force updates if desired (or at least send strong reminders to avoid updating in the middle of a client meeting).

Over the last year, the company developed a dashboard for IT to monitor all of the devices under its management, including providing an overall health score with any potential problems it has found. For example, there may be a number of MacBook Pros without disk encryption enabled.

The dashboard ties into the identity management component of Office 365 and G Suite. IT can import the employee directory into the dashboard from either tool, and employees can sign into Fleetsmith with either set of credentials, providing a quick way to manage all employees in an organization.

Screenshot: Fleetsmith

Fleetsmith has also set up a partner program with Managed Service Providers (MSPs) to expand its reach further. MSPs manage IT for SMBs, and building a relationship with these types of companies can help it expand much more quickly.

The approach seems to be working, as the company has 30 employees and 1,500 customers. With the new cash in pocket, it intends to hire more people and continue building out the product’s capabilities, while expanding beyond the U.S. to markets overseas.

Apr
03
2019
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Torch takes $10M to teach empathy to executives

When everyone always tells you “yes,” you can become a monster. Leaders especially need honest feedback to grow. “If you look at rich people like Donald Trump and you neglect them, you get more Donald Trumps,” says Torch co-founder and CEO Cameron Yarbrough about our gruff president. His app wants to make executive coaching (a polite word for therapy) part of even the busiest executive’s schedule. Torch conducts a 360-degree interview with a client and their employees to assess weaknesses, lays out improvement goals and provides one-on-one video chat sessions with trained counselors.

“Essentially we’re trying to help that person develop the capacity to be a more loving human being in the workplace,” Yarbrough explains. That’s crucial in the age of “hustle porn,” where everyone tries to pretend they’re working all the time and constantly “crushing it.” That can leave leaders facing challenges feeling alone and unworthy. Torch wants to provide a private place to reach out for a helping hand or shoulder to cry on.

Now Torch is ready to lead the way to better management for more companies, as it’s just raised a  $10 million Series A round led by Norwest Ventures, along with Initialized Capital, Y Combinator and West Ventures. It already has 100 clients, including Reddit and Atrium, but the new cash will fuel its go-to market strategy. Rather than trying to democratize access to coaching, Torch is doubling-down on teaching founders, C-suites and other senior executives how to care… or not care too much.

“I came out of a tough family myself and I had to do a ton of therapy and a ton of meditation to emerge and be an effective leader myself,” Yarbrough recalls. “Philosophically, I care about personal growth. It’s just true all the way down to birth for me. What I’m selling is authentic to who I am.”

Torch’s co-founders met when they were in grad school for counseling psychology degrees, practicing group therapy sessions together. Yarbrough went on to practice clinically and start Well Clinic in the Bay Area, while Keegan Walden got his PhD. Yarbrough worked with married couples to resolve troubles, and “the next thing I know I was working with high-profile startup founders, who like anybody have their fair share of conflicts.”

Torch co-founders (from left): Cameron Yarbrough and Keegan Walden

Coaching romantic partners to be upfront about expectations and kind during arguments translated seamlessly to keep co-founders from buckling under stress. As Yarbrough explains, “I was noticing that they were consistently having problems with five different things:

1. Communication – Surfacing problems early with kindness

2. Healthy workplace boundaries – Making sure people don’t step on each others’ toes

3. How to manage conflict in a healthy way – Staying calm and avoiding finger-pointing

4. How to be positively influential – Being motivational without being annoying or pushy

5. How to manage one’s ego, whether that’s insecurity or narcissism – Seeing the team’s win as the first priority

To address those, companies hire Torch to coach one or more of their executives. Torch conducts extensive 360-degree interviews with the exec, as well as their reports, employees and peers. It seeks to score them on empathy, visionary thinking, communication, conflict, management and collaboration, Torch then structures goals and improvement timelines that it tracks with follow-up interviews with the team and quantifiable metrics that can all be tracked by HR through a software dashboard.

To make progress on these fronts, execs do video chat sessions through Torch’s app with coaches trained in these skills. “These are all working people with by nature very tight schedules. They don’t have time to come in for a live session so we come to them in the form of video,” Yarbrough tells me. Rates vary from $500 per month to $1,500 per month for a senior coach in the U.S., Europe, APAC or EMEA, with Torch scoring a significant margin. “We’re B2B only. We’re not focused on being the most affordable solution. We’re focused on being the most effective. And we find that there’s less price sensitivity for senior leaders where the cost of their underperformance is incredibly high to the organization.” Torch’s top source of churn is clients’ going out of business, not ceasing to want its services.

Here are two examples of how big-wigs get better with Torch. “Let’s say we have a client who really just wants to be liked all the time, so much so that they have a hard time getting things done. The feedback from the 360 would come back like ‘I find that Cameron is continually telling me what I want to hear but I don’t know what the expectations are of me and I need him to be more direct,’ ” Yarbrough explains. “The problem is those leaders will eventually fire those people who are failing, but they’ll say they had no idea they weren’t performing because he never told them.” Torch’s coaches can teach them to practice tough-love when necessary and to be more transparent. Meanwhile, a boss who storms around the office and “is super-direct and unkind” could be instructed on how to “develop more empathic attunement.”

Yarbrough specifically designed Torch’s software to not be too prescriptive and leave room for the relationship between the coach and client to unfold. And for privacy, coaches don’t record notes and HR only sees the performance goals and progress, not the content of the video chats. It wants execs to feel comfortable getting real without the worry their personal or trade secrets could leak. “And if someone is bringing in something about trauma or that’s super-sensitive about their personal life, their coach will refer them out to psychotherapists,” Yarbrough assures me.

Torch’s direct competition comes from boutique executive coaching firms around the world, while on the tech side, BetterUp is trying to make coaching scale to every type of employee. But its biggest foe is the stubborn status quo of stiff-upper-lipping it.

The startup world has been plagued by too many tragic suicides, deep depression and paralyzing burnout. It’s easy for founders to judge their own worth not by self-confidence or even the absolute value of their accomplishments, but by their status relative to yesterday. That means one blown deal, employee quitting or product delay can make an executive feel awful. But if they turn to their peers or investors, it could hurt their partnership and fundraising prospects. To keep putting in the work, they need an emotional outlet.

“We ultimately have to create this great software that super-powers human beings. People are not robots yet. They will be someday, but not yet,” Yarbrough concludes with a laugh. IQ alone doesn’t make people succeed. Torch can help them develop the EQ, or emotional intelligence quotient, they need to become a boss that’s looked up to.

Apr
03
2019
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Rippling raises $45M at $270M to be the biz app identity layer

Parker Conrad’s last startup, Zenefits, drowned in busy work. Now with Rippling, he wants to boil that ocean. Instead of trying to nail one thing then expand, “very counter to conventional wisdom, we took on something that’s a lot broader and more ambitious.” That meant spending two years with 40 engineers working in stealth to build integrations with nearly every popular business tool to combine HR, IT and single-sign on services. The result is that when you hire an employee, Rippling onboards them to all those services in a single click. Goodbye, busy work. Hello, gateway to the enterprise app ecosystem.

The past few years have seen a Cambrian explosion of startups building specialty software for office productivity and collaboration. But that’s left customers struggling to get their teams set up on all these fragmented tools. As such, Rippling had a very good first year on the market with rapidly growing revenue. So when Rippling went out to raise money, Conrad was signing term sheets in just over a week.

Forty-five million dollars. “I know that rounds are bigger these days, but still, for a Series A, that’s pretty substantial,” Conrad tells me with a wide grin over coffee at San Francisco’s Four Barrel. “We want to keep doubling down on the engineering, investing and putting more money into R&D, so we have real product advantages and technology advantages over other players in our space, even though a lot of them have been around a lot longer than we have.” The Information‘s Zoe Bernard had reported Rippling was raising at least $30 million.

Rippling’s round was led by Kleiner Perkins and its enterprise guru Mamoon Hamid. As Conrad tells me, “Many of the metrics you use to evaluate SaaS companies were invented by Mamoon. He really knows his stuff. He’s also just a really great person.” Kleiner was his dream partner for Rippling. “I remember when I was in high school, Kleiner Perkins was the only VC firm I’d ever heard of. When I was a little kid, I thought ‘Oh that’d be cool some day.’ ” The round was joined by Initialized Capital, Threshold Ventures (formerly DFJ) and Y Combinator.

A source confirms the round was a stunning $270 million valuation. Hamid was also skeptical about Rippling trying to integrate with everyone before launch. But, he says, “What was a concern a few years ago is now something we like about the company.” After getting pitched so many piecemeal enterprise solutions, it suddenly clicked for Hamid why customers would want “one stop for everything. You need an independent party to be that glue layer.” 

Typically, enterprise software is an unglued mess. Apps don’t talk to each other, so when you hire a new employee, you have to manually add them, their role, their team, their manager, their permissions and more to every single tool your team uses. There are HR systems that control payroll and benefits, IT systems that determine what equipment you’re issued, productivity and collaboration apps like Slack and Dropbox and department-specific tools like Salesforce or GitHub. Conrad believes manually updating these with each hire, fire or promotion is the source of almost all administrative work at a company.

The willingness to slog through office chores rather than strategically nullify them is why Zenefits grew so fast, then suddenly hit a wall. What can be begrudgingly brute-forced at 50 employees becomes impossible to manage at 500 employees. That’s why, he says, “We don’t want to have anything that’s not software end to end in the product.” If it requires a client to call Rippling’s operations team for help, it could be built better. That maniacal focus actually allowed Conrad to temporarily hold Rippling’s only role responding to user complaints, which he also credits with propelling rapid iteration. The CEO wants to remain in that mindset, so he still lists his job title on LinkedIn as “Customer Support.”

Conrad seems to have convinced investors that though he was pushed out of his $4.5 billion-valuation HR startup Zenefits, he was more responsible for its rise than its fall. Conrad had built a script that allowed Zenefits staffers to stay logged in to the study portion of their insurance exam. Conrad insists it played no part in helping them study for or pass the certification test. Still, regulators got involved, leading to his departure and a combined $1 million SEC fine for him and Zenefits. The desire to speed things up was another symptom of busy work draining the company’s time.

There were also culture issues, with Zenefits once having to tell employees not to have sex in the office stairwells. A more measured pace and a deeper commitment to diversity are a few other ways Rippling hopes to avoid the culture troubles of Conrad’s last venture.

Rippling only truly began hiring more than engineers when it came out of stealth a year ago. Now the startup has established two lucrative business models. First, it earns reseller fees from other enterprise tool makers when people buy them through the Rippling gateway. Any developer with a well-established brand becomes an integrated Rippling partner. It’s not going to try to out-build Zoom or Mailchimp. “As Rippling is successful, what I think it can do is bring a lot of customers to these other businesses. If you can bring down the marginal cost of adding an N+1 business system, there’s a lot less hesitation about adding products.” Customers want more utility, just without the headache.

Meanwhile, Rippling develops its own in-house versions of undifferentiated parts of the HR and IT stacks, like PTO management or commuter benefits. Customers aren’t loyal to a brand in these areas yet, so it’s easy for Rippling to swoop in. And it can charge a similar rate, but beat competitors on convenience because its homegrown systems integrate directly with Rippling’s source of truth on employee details. Upstarts in the single-sign on space like Okta and LastPass claim to be identity layers, but are really just password managers. And their early growth has spurred SaaS companies to build API endpoints on which Rippling’s version RPass can piggyback.

For a while I thought Slack would emerge as the enterprise identity provider because chat is such a ubiquitous need that it could be the start of a cross-app profile. But HR and IT are an even more foundational layer, and Slack doesn’t feel like a natural place to gather employee details like Rippling is. “For slack, communication and collaboration in general are a big enough opportunity to not let identity get in the way of the core business there,” says Hamid.

Now with Rippling’s business revving up and plenty of cash to fuel the engine, Conrad tells me his biggest concern is hiring the right people. “The really challenging thing in a company is when the headcount grows too quickly. I’m making sure we don’t do things like more than double headcount in a 12-month period,” he tells me. While Zenefits was a mad blitz for scale, Conrad has tried to bias Rippling toward action without being so impulsive that the company makes mistakes. “It’s never easy, but we’re not yet at the scale where things become really scary. We have a little bit more time to hit milestones. We’re growing at a healthy clip, but nothing that’s straining things in any way and we see that because we track our NPS very closely,” he says of trying to run a business at a more livable pace while being an active dad, too.

Luckily, Zenefits taught him how to avoid many of the pitfalls of entrepreneurship. Conrad concludes that he’s happy to have gone from “playing video games on impossible mode versus medium mode.”

Apr
03
2019
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Enterprise blockchain startup Offchain Labs scores $3.7M seed round

Two of the issues limiting blockchain adoption in the enterprise has been lack of scalability and privacy. Offchain Labs, a startup that spun out of research at Princeton, wants to help create more scalable smart contracts while shifting part of the process off of the public blockchain to increase privacy. Today, the company announced a $3.7M seed round led by Pantera Capital.

Compound VC, Raphael Ouzan of Blocknation, Jake Seid, managing director at Stone Bridge Ventures and other unnamed investors also participated.

The startup has created a protocol called Arbitrum that helps developers scale smart contracts in a way that’s difficult to do right now, says company co-founder Ed Felten. “We’re working to build a platform for smart contract development that provides what we think developers want, a combination of scalability so that you can scale to more transactions per second, more users, and to contracts that have more code and still have more data in them,” he explained.

In addition to scalability, the company believes that companies want a way to business without sharing everything they are doing, as is required on a public chain. “The second thing we think people want is privacy, meaning control over who gets to see what’s happening in their contract. So you don’t have to publish everything about your contracts, your code and everything it does on a public chain in order to get your work done.”

The last piece related to that is trust. “Our platform offers what we call the ‘Any Trust Guarantee’, which means that when you launch or deploy your contract, you specify a set of validators for it. And the guarantee we give you is that as long as at least one validator is acting honestly, your contract will execute correctly, no matter how evil or inattentive the other validators are,” Felten said.

The company was born out of research at Princeton University and began with what Felten called an academic prototype created in their labs. Felten is a computer science professor at Princeton, and also served as Deputy CTO to the White House under President Obama,

Those credentials and the prototype showed enough to attract investors. Today, the company is hoping to use the money to complete a Beta version of Arbitrum. He wouldn’t commit to a timeline, but said the product is close.

While Felten recognizes he is competing with giants like IBM and SAP in the enterprise blockchain space, he believes that the startup has come up with a solution to a persistent problem for blockchain developers, and they are releasing the protocol as open source to make it even more attractive.

Apr
03
2019
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Onfido, which verifies IDs using AI, nabs $50M from SoftBank, Salesforce, Microsoft and more

Security breaches, where malicious hackers obtain snippets of information that then get used to impersonate individuals in order to gain access to individuals’ and businesses’ sensitive financial and other private information, have become par for the course in the world of digital services. More than 2.7 billion records were  breached in a single incident this year in the US, and overall the damage from incidents like these potentially runs into the trillions of dollars globally.

Today, a startup called Onfido, which uses AI techniques combined with human verifiers to efficiently verify people are who they say they are when using digital services — is today announcing $50 million in funding to help address that ongoing — and growing — problem.

The funding comes on the heels of some very strong growth for the startup, which was founded in London but now operates most of its business out of San Francisco. In an interview, co-founder and CEO Husayn Kassai said that more than half of its customers, and most of its new growth, is coming out of the US.

Onfido uses computer vision and a number of other AI-based technologies to verify against some 4,500 different types of identity documents, using techniques like “facial liveness testing,” to see patterns invisible to the human eye, now has 1,500 businesses as customers, primarily in categories like marketplaces and communities, gaming and financial services, including companies like Remitly, Zipcar and Europcar; and in the last year, it had sales growth of 342 percent. Kassai said that it has to date verified “tens of millions” of IDs.

The money — a Series C2, technically — is coming from a group that includes top strategic tech investors. The round is being co-led by SoftBank Investment (SBI) and Salesforce Ventures, with M12 (the new name for Microsoft Ventures), FinVC and other unnamed new and previous investors are also participating. That’s a signal not just of how the biggest companies in that sector today are grappling with this problem, but also what approach they are using to solve it.

For SoftBank, the investment is separate from the Vision fund, founder and CEO Husayn Kassai noted, but it’s notable that a lot of the businesses that have been backed out of that fund — companies like Didi, Uber, Oyo, Lemonade, and others — fundamentally rely on people trusting that they are handling personal details securely while also carefully vetting suppliers on the platform (meaning, they need and use services like Onfido’s).

Meanwhile, both Microsoft and Salesforce have extensive enterprise businesses that could see multiple benefits from working with an identity verification provider, not just for their own purposes, but as a service that is sold on to its customers as part of a larger identity management and security offering.

The company is not revealing its valuation but has raised around $100 million to date and Kassai confirmed that it was an upround, with “a lot of happy investors.”

“We have strong metrics, and we have a long way to go in our growth,” he added.

There are a lot of companies today offering services to help offer secure services to authenticate users, for example, to help them log on to their work accounts or to access their online banking services. Onfido’s business focuses on the first step in all of this — customer onboarding — specifically around services geared towards consumers.

The opportunity that has opened up for it has been the result of more than just a rise in breaches. There’s also been a growing realization that a lot of the existing services that had been used for verification are simply not fit for purpose: either they too have been breached — as in the case of some of the bigger credit agencies like Equifax — or are not realistically efficient enough for how many online services run today, such as in the case of in-person verifications. (Onfido claims that its system can make a verification in as little as 15 seconds.)

Or, they are part of the new guard that has shifted its approach to the business of ID verificiation, either by choice or force. One would-be competitor from the past, Checkr, is now a partner of Onfido’s, Kassai noted. Others like Jumio — which is still grappling with the fallout from major illegal missteps from previous management — seem to still be trying to find their feet as standalone businesses.

“Fraud is rising and not going anywhere,” Kassai — who co-founded the company with Ruhul Amin and Eamon Jubbawy — said. “And the problem is that there are a dozen other companies that have not done a good enough job to detect it so far.” While no service is perfect — Onfido says that its “risk exposure” is 0.0195 percent — he says that the advantage of building its service on top of AI means that the algorithms use every experience to continue honing its accuracy. “What we learn from one client gets applied everywhere,” he notes.

“There has never been a more important time for companies to build trust with their customers by showing they are one step ahead of fraudsters,” said Frank van Veenendaal, the ex-vice chairman of Salesforce, who is joining the board with this round. “I believe Onfido has the unique opportunity to transform the digital identity market and deliver robust and scalable authentication-as-a-service, similar to how Salesforce transformed customer relationship management.”

Apr
03
2019
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Container security startup Aqua lands $62M Series C

Aqua Security, a startup that helps customers launch containers securely, announced a $62 million Series C investment today led by Insight Partners.

Existing investors Lightspeed Venture Partners, M12 (Microsoft’s venture fund), TLV Partners and Shlomo Kramer also participated. With today’s investment, the startup’s investments since inception now total over $100 million, according to the company.

Early investors took a chance on the company when it was founded in 2015. Containers were barely a thing back then, but the founders had a vision of what was coming down the pike and their bet has paid off in a big way as the company now has first-mover advantage. As more companies turn to Kubernetes and containers, the need for a security product built from the ground up to secure this kind of environment is essential.

While co-founder and CEO Dror Davidoff says the company has 60 Fortune 500 customers, he’s unable to share names, but he can provide some clues like five of the world’s top banks. As companies like that turn to new technology like containers, they aren’t going to go whole hog without a solid security option. Aqua gives them that.

“Our customers are all taking very dramatic steps towards adoption of those new technologies, and they know that existing security tools that they have in place will not solve the problems,” Davidoff told TechCrunch. He said that most customers have started small, but then have expanded as container adoption increases.

You may thank that an ephemeral concept like a container would be less of a security threat, but Davidoff says that the open nature of containerization actually leaves them vulnerable to tampering. “Container lives long enough to be dangerous,” he said. He added, “They are structured in an open way, making it simple to hack, and once in, to do lateral movement. If the container holds sensitive info, it’s easy to have access to that information.”

Aqua scans container images for malware and makes sure only certified images can run, making it difficult for a bad actor to insert an insecure image, but the ephemeral nature of containers also helps if something slips through. DevOp can simply take down the faulty container and put a newly certified clean one quickly.

The company has 150 employees with offices in the Boston area and R&D in Tel Aviv in Israel. With the new influx of cash, the company plans to expand quickly, growing sales and marketing, customer support and expanding the platform into areas to cover emerging areas like serverless computing. Davidoff says the company could double in size in the next 12-18 months and he’s expecting 3x to 4x customer growth.

All of that money should provide fuel to grow the company as containerization spreads and companies look for a security solution to keep containers in production safe.

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