US cyber security specialist venture capital firm Ten Eleven Ventures has led a $29.8 million Series A capital raising in cyber security company Fivecast.
Existing backers Main Sequence Ventures and the Artesian-managed South Australian Venture Capital Fund have supported the fundraising.
Ten Eleven Ventures previously invested in Australia-founded cyber security company Kasada. The firm was advised on the Fivecast deal by former prime minister Malcolm Turnbull.
Adelaide-based Fivecast says it is expanding in the UK and the US and stands to benefit from increased cooperation between the Five Eyes intelligence sharing arrangement (between the US, the UK, Australia, Canada and New Zealand) and the recently signed AUKUS security alliance.
Fivecast has a stated mission of enabling a safer world by identifying potential threats to national security, law enforcement, corporate security and financial markets.
Co-founder and chief executive Dr Brenton Cooper declined to reveal the company’s post-funding valuation but said it had increased more than 12 times since its [$4 million] 2019 round (APE&VCJ, July 2019). Fundraising for the latest round started last June and had taken longer than initially expected because of changing sentiment in the broader tech market.
“It took us quite a while to get to a term sheet, and during that time the market turned quite severely,” Cooper said. “Revenue multiples for VC Series A rounds went from 18x in June down to about 8x when we closed. So, from that perspective, it was a pretty tough environment.
“We needed to zero in on the investors that really understood our value proposition … before signing with our lead investor, Ten Eleven, we started by speaking to 60-odd investment funds and very quickly narrowed them down to nine contenders … overall, it was a great experience.”
Fivecast’s technology uses artificial intelligence (AI) to trawl open-source data from chatrooms, public social media, online marketplaces, and the dark web to gather and assess intelligence to determine the risk individuals and groups pose to its customers.
Among Fivecast’s use cases are monitoring for threats related to extremists and organised crime, as well as corporate security services, such as supply chain risk management, insider threats and fraud detection.
A recent example of non-government work was in assisting a partner organisation to ensure security at the 2022 FIFA World Cup in Qatar.
Cooper said Fivecast’s technology was used to sift through online data, to provide early warning on any threat factors such as overcrowding, unrest among fans, logistics problems or transportation issues.
“Other corporate clients in this space range from big mining companies to large online retailers and financial institutions, which are facing more regulation and a need to better know their customers,” Cooper said.
“Financing of terrorism and money laundering are primary targets, and companies need to make sure they’re doing everything to tackle issues at hand.”
Fivecast has also worked with a crypto wallet provider which was trying to understand the connections between people who create cryptocurrencies and those who might use crypto coins to fund nefarious activity.
Since its 2019 raise, Cooper said, the company had achieved strong growth, boosting staff numbers to 120 from 16 across four offices. The company remains headquartered in Adelaide but now has a sales office in Canberra, a US office of 20 people in Washington, and a 10-staff UK base in London.
Cooper declined to provide specific figures but said Fivecast was profitable last year and its revenue had increased by 40x since 2019.
Over 60% of Fivecast’s revenue comes from the US, where it has clients in defence, law enforcement, national security organisations, and, more recently, corporate security.
“Being headquartered in a Five Eyes nation with footprint in others is certainly an advantage – it’s a tight-knit group, and we often win business through referrals from one country to another. This is why we work closely with AusTrade, as well as the Australian embassies in the US and UK,” Cooper said, “with AUKUS in motion, we’re now hoping to achieve closer engagement on the recognition of security clearances between countries.”
The new capital will be used for further development of existing products, growing sales teams in the US, UK and Europe, and fresh R&D to develop new product lines, such as solutions for understanding foreign interference, anti-money laundering and managing brand reputations against manipulation.
Cooper said Fivecast had a target of doubling its revenue in the next 12 months, with US growth expected to be the main driver because of the country’s huge spending on defence and law enforcement.
An increasingly fractured geopolitical scene will continue to provide new commercial opportunities, according to Cooper.
“In the era of great power competitions, China, Russia, North Korea and Iran are some of the big names causing regular headaches within our Five Eyes markets,” he said. “Our customers have an increasing need to understand what these nations are doing from technology, political and socioeconomic perspectives.
“Targeted data collection and analysis of publicly available information helps break down foreign interference and define their tactics, which ultimately informs our customer’s policies and approaches to combat great global hostilities.”
In an interview with The Australian Financial Review Ten Eleven Ventures managing partner Alex Doll said his firm viewed the cybersecurity industry as a global opportunity, and he had recognised “a ton of specialised talent,” in Australia.
While US VC investors had dialled back their spending in the last year, he said, Ten Eleven saw strong opportunity in its specialty area and planned to make 10-15 investments in the world’s most promising cybersecurity companies each year.
“We are active in Australia and have numerous touchpoints there. For example, Malcolm Turnbull is a key member of our advisory board,” Doll said.
“We have strong relationships with several Australian trade groups actively supporting cybersecurity innovation in the country. In fact, we were just in Australia in January on a tour to meet companies and investors we can partner with.
“We felt confident in Fivecast’s talent level, and that we could help the company reach out to other markets, including the US and UK. They have the talent and ambition to compete globally.”
Image: Fivecast chief executive Dr Brenton Cooper.