2018 wasn’t all bad. It turned out to be a record year for venture capital firms investing in cybersecurity companies.
According to new data out by Strategic Cyber Ventures, a cybersecurity-focused investment firm with a portfolio of four cybersecurity companies, more than $5.3 billion was funneled into companies focused on protecting networks, systems and data across the world, despite fewer deals done during the year.
That’s up from 20 percent — $4.4 billion — from 2017, and up from close to double on 2016.
Part of the reason was several “mega” funding rounds, according to the company. Last year saw some of the big eight companies getting bigger, amassing a total of $1.3 billion in funding last year. That includes Tanium’s combined $375 million investment, Anchorfree’s $295 million and CrowdStrike’s $200 million.
According to the report, North America leads the rest of the world with $4 billion in VC funding, with Europe and Asia neck-and-neck at around $550 million each, but growing year-over-year.
In fact, according to the data, California — where many of the big companies have their headquarters — accounts for nearly half of all VC funding in cybersecurity in 2018. By comparison, only about $300 million went to the “government” region — including Maryland, Virginia and Washington, DC, where many government-backed or focused companies are located.
“As DC residents, we have to think there is more the city could do to entice cybersecurity companies to establish their headquarters in the city,” the firm said. Virtru, an email encryption and data privacy firm, drove the only funding of cybersecurity investment in Washington, DC last year, they added.
“We’ve seen this trend in the broader tech ecosystem as well, with many, large international funds and investment outside of the U.S.,” the firm said. “Simply put, amazing and valuable technology companies are being created outside of the U.S.”
Looking ahead, Tanium and CrowdStrike are highly anticipated to IPO this year — so long as the markets hold stable.
“It’s still unclear what the public equity markets have in store in 2019,” the firm said. “A few weeks in and we’re already experiencing a government shutdown, trade wars with China, and expected slow down in global economic growth.”
“However, only time will tell what 2019 has in store,” the firm concluded.
The app based offering is aimed at facilitating personal and small merchant payments within countries and across Africa’s national borders. Existing Visa card holders can send and receive funds at home or internationally on GetBarter.
The product also lets non card-holders (those with accounts or mobile wallets on other platforms) create a virtual Visa card to link to the app. A Visa spokesperson confirmed the product partnership.
GetBarter allows Flutterwave—which has scaled as a payment gateway for big companies through its Rave product—to pivot to African consumers and traders.
The app also creates a network for clients on multiple financial platforms, such as Kenyan mobile money service M-Pesa, to make transfers across payment products, national borders, and to shop online.
“The target market is pretty much everyone who has a payment need in Africa. That includes the entire customer base of M-Pesa, the entire bank customer base in Nigeria, mobile money and bank customers in Ghana—pretty much the entire continent,” Agboola said.
Flutterwave and Visa will focus on building a GetBarter user base across mobile money and bank clients in Kenya, Ghana, and South Africa, with plans to grow across the continent and reach those off the financial grid.
“In phase one we’ll pursue those who are banked. In phase-two we’ll continue toward those who are unbanked who will be able to use agents to work with GetBarter,” Agboola said.
Flutterwave and Visa will generate revenue through fees from financial institutions on cards created and on fees per transaction. A GetBarter charge for a payment in Nigeria is roughly 40 Naira, or 11 cents, according to Agboola.
Founded in 2016, Flutterwave has positioned itself as a global B2B payments solutions platform for companies in Africa to pay other companies on the continent and abroad. It allows clients to tap its APIs and work with Flutterwave developers to customize payments applications. Existing customers include Uber, Facebook, Booking.com, and African e-commerce unicorn Jumia.com.
Flutterwave has processed 100 million transactions worth $2.6 billion since inception, according to company data.
The company has raised $20 million from investors including Greycroft, Green Visor Capital, Mastercard, and Visa.
In 2018, Flutterwave was one of several African fintech companies to announce significant VC investment and cross-border expansion—see Paga, Yoco, Cellulant, Mines.ie, and Jumo.
Flutterwave added operations in Uganda in June and raised a $10 million Series A round in October that saw former Visa CEO Joe Saunders join its board of directors.
The company also plugged into ledger activity in 2018, becoming a payment processing partner to the Ripple and Stellar blockchain networks.
Flutterwave hasn’t yet released revenue or profitability info, according to CEO Olugbenga Agboola.
Headquartered in San Francisco, with its largest operations center in Nigeria, the startup plans to add operations centers to South Africa and Cameroon, which will also become new markets for GetBarter.
Online tax filing and accounting service, Contabilizei, has raised $20 million in a new round of financing led by Point72 Ventures, the early stage investment arm associated with hedge fund guru Steven Cohen’s Point72 Asset Management.
Smart money in both the venture and private equity space has been long Brazil for a bit, and the new investment provides even more firepower to the thesis that Brazil’s startup ecosystem is on the move.
“For the Brazilian ecosystem, the investment represents the trust and the opportunity that we have here in the Brazilian market. For quite some time it was difficult to attract this kind of investment from abroad,” says Contabilizei chief executive Vitor Torres. Even though we had a recession there are technology companies that are growing,” Torres says, saying that the company has already staved off acquisition offers and will eventually eye a potential public offering in U.S. or domestic markets.
Though it was only founded five years ago, the company already has 200 employees and more than 10,000 customers throughout Brazil.
Contabilizei has already audited more than 2 billion reals in customer revenue and saved its users over 500 million reals in taxes. For new companies, Contabilizei will also offer free business registration and formation filings. So far, the company has helped 5,000 new businesses get their paperwork done around the country.
“In Brazil, one of the greatest frictions for a small company is meeting its tax reporting requirements,” said Pete Casella, Head of Fintech & Financial Services Investments at Point72 Ventures. “By building an automated tax accounting service that can deliver services at a fraction of the cost of a traditional accountant, we believe that Contabilizei has established the high trust relationships that will enable it to serve customers in many new ways over the coming years.”
New investors also contributed to the round including the International Financial Corp., an investment arm of the The World Bank, and Quona Capital, Quadrant, and the Fintech Collective. They joined existing company backers Kaszek Ventures, e.Bricks, Endeavor Catalyst, and Curitiba Angels.
“Our goal is to simplify the entrepreneur’s routine so they can focus on their own business and not on bureaucracy. We are only at the beginning, and in three years we want to grow 15 times more,” said Vitor Torres, chief executiver and founder of Contabilizei, in a statement. “We were pioneers in the debureaucratization of accounting in the country and we managed to do it with a quality that surpasses 98% of our customers’ satisfaction.”
The service was launched in 2013 to help book quality restaurants, including those that are Michelin-starred and others that have months-long waitlists for reservations. It currently works with 800 restaurants and is available in Japanese, English and Chinese, its closest competitors include OpenTable and local operator TableAll.
American Express said Pocket Concierge will continue as a wholly owned subsidiary. It plans to integrate the business with its card membership services.
Pocket Menu, the parent company, raised a $600,000 seed round, which included 500 Startups and others, before going on to raise an undisclosed Series A and other investments. Founder Kei Tokado is a former chef, and he was joined by co-founder and CFO Tatsuro Koyama in 2015.
“When we were just getting started, we talked about the opportunity for cross-border M&A in Japan. For foreign companies, acquiring locally is a viable way to unlock value in this country. A lot of people rightfully doubted that possibility, as it is so uncommon. Pocket Concierge not only proved that it is possible, but they also found a home at one of the world’s most well-respected companies,” Riney — the 500 Startups lead — wrote.
In late October following a significant victory for Jair Bolsonaro in Brazil’s presidential elections, the stock market for Latin America’s largest country shot up. Financial markets reacted favorably to the news because Bolsonaro, a free-market proponent, promises to deliver broad economic reforms, fight corruption and work to reshape Brazil through a pro-business agenda. While some have dubbed him as a far-right “Trump of the Tropics” against a backdrop of many Brazilians feeling that government has failed them, the business outlook is extremely positive.
When President-elect Bolsonaro appointed Santander executive Roberto Campos as new head of Brazil’s central bank in mid-November, Brazil’s stock market cheered again with Sao Paulo’s Bovespa stocks surging as much as 2.65 percent on the day news was announced. According to Reuters, “analysts said Bolsonaro, a former army captain and lawmaker who has admitted to having scant knowledge of economics, was assembling an experienced economic team to implement his plans to slash government spending, simplify Brazil’s complex tax system and sell off state-run companies.”
Admittedly, there are some challenges as well. Most notably, pension-system reform tops the list of priorities to get on the right track quickly. A costly pension system is increasing the country’s debt and contributed to Brazil losing its investment-grade credit rating in 2015. According to the new administration, Brazil’s domestic product could grow by 3.5 percent during 2019 if Congress approves pension reform soon. The other issue that’s cropped up to tarnish the glow of Bolsonaro coming into power are suspect payments made to his son that are being examined by COAF, the financial crimes unit.
While the jury is still out on Bolsonaro’s impact on Brazilian society at large after being portrayed as the Brazilian Trump by the opposition party, he’s come across as less authoritarian during his first days in office. Since the election, his tone is calmer and he’s repeatedly said that he plans to govern for all Brazilians, not just those who voted for him. In his first speech as president, he invited his wife to speak first which has never happened before.
Still, according to The New York Times, “some Brazilians remain deeply divided on the new president, a former army captain who has hailed the country’s military dictators and made disparaging remarks about women and minority groups.”
Others have expressed concern about his environment impact with the “an assault on environmental and Amazon protections” through an executive order within hours of taking office earlier this week. However, some major press outlets have been more upbeat: “With his mix of market-friendly economic policies and social conservativism at home, Mr. Bolsonaro plans to align Brazil more closely with developed nations and particularly the U.S.,” according to the Wall Street Journal this week.
Based on his publicly stated plans, here’s why President Bolsonaro will be good for business and how his administration will help build an even stronger entrepreneurial ecosystem in Brazil:
Bolsonaro’s Ministerial Reform
President Temer leaves office with 29 government ministries. President Bolsonaro plans to reduce the number of ministries to 22, which will reduce spending and make the government smaller and run more efficiently. We expect to see more modern technology implemented to eliminate bureaucratic red tape and government inefficiencies.
Importantly, this will open up more partnerships and contracting of tech startups’ solutions. Government contacts for new technology will be used across nearly all the ministries including mobility, transportation, health, finance, management and legal administration – which will have a positive financial impact especially for the rich and booming SaaS market players in Brazil.
Government Company Privatization
Of Brazil’s 418 government-controlled companies, there are 138 of them on the federal level that could be privatized. In comparison to Brazil’s 418, Chile has 25 government-controlled companies, the U.S. has 12, Australia and Japan each have eight, and Switzerland has four. Together, Brazil-owned companies employ more than 800,000 people today, including about 500,000 federal employees. Some of the largest ones include petroleum company Petrobras, electric utilities company Eletrobras, Banco do Brasil, Latin America’s largest bank in terms of its assets, and Caixa Economica Federal, the largest 100 percent government-owned financial institution in Latin America.
The process of privatizing companies is known to be cumbersome and inefficient, and the transformation from political appointments to professional management will surge the need for better management tools, especially for enterprise SaaS solutions.
STEAM Education to Boost Brazil’s Tech Talent
Based on Bolsonaro’s original plan to move the oversight of university and post-graduate education from the Education Ministry to the Science and Technology Ministry, it’s clear the new presidential administration is favoring more STEAM courses that are focused on Science, Technology, Engineering, the Arts and Mathematics.
Previous administrations threw further support behind humanities-focused education programs. Similar STEAM-focused higher education systems from countries such as Singapore and South Korea have helped to generate a bigger pipeline of qualified engineers and technical talent badly needed by Brazilian startups and larger companies doing business in the country. The additional tech talent boost in the country will help Brazil better compete on the global stage.
The Chicago Boys’ “Super” Ministry
The merger of the Ministry of Economy with the Treasury, Planning and Industry and Foreign Trade and Services ministries will create a super ministry to be run by Dr. Paulo Guedes and his team of Chicago Boys. Trained at the Department of Economics in the University of Chicago under Milton Friedman and Arnold Harberger, the Chicago Boys are a group of prominent Chilean economists who are credited with transforming Chile into Latin America’s best performing economies and one of the world’s most business-friendly jurisdictions. Joaquim Levi, the recently appointed chief of BNDES (Brazilian Development Bank), is also a Chicago Boy and a strong believer in venture capital and startups.
Previously, Guedes was a general partner in Bozano Investimentos, a pioneering private equity firm, before accepting the invitation to take the helm of the world’s eighth-largest economy in Brazil. To have a team of economists who deeply understand the importance of rapid-growth companies is good news for Brazil’s entrepreneurial ecosystem. This group of 30,000 startup companies are responsible for 50 percent of the job openings in Brazil and they’re growing far faster than the country’s GDP.
Bolsonaro’s Pro-Business Cabinet Appointments
President Bolsonaro has appointed a majority of technical experts to be part of his new cabinet. Eight of them have strong technology backgrounds, and this deeper knowledge of the tech sector will better inform decisions and open the way to more funding for innovation.
One of those appointments, Sergio Moro, is the federal judge for the anti-corruption initiative knows as “Operation Car Wash.” With Moro’s nomination to Chief of the Justice Department and his anticipated fight against corruption could generate economic growth and help reduce unemployment in the country. Bolsonaro’s cabinet is also expected to simplify the crazy and overwhelming tax system. More than 40 different taxes could be whittled down to a dozen, making it easier for entrepreneurs to launch new companies.
In general terms, Brazil and Latin America have long suffered from deep inefficiencies. With Bolsonaro’s administration, there’s new promise that there will be an increase in long-term infrastructure investments, reforms to reduce corruption and bureaucratic red tape, and enthusiasm and support for startup investments in entrepreneurs who will lead the country’s fastest-growing companies and make significant technology advancements to “lift all boats.”
Square’s management continues to shuffle. One week after the merchant services and mobile payments company tapped Amrita Ahuja to lead finance, replacing long-time executive Sarah Friar who landed the chief executive role at Nextdoor, the company’s head of payments, Mary Kay Bowman, has joined Visa as its head of seller solutions.
The company will promote someone internally to fill the position, according to a source familiar with the matter.
Bowman joined Square in 2015 after more than a decade at Amazon, most recently as the e-commerce giant’s director of global payments. In her new role, Visa says Bowman will lead the credit card company’s “strategy for acceptance products and solutions, driving the design, development and delivery of new services and solutions that will transform the payment experience for both sellers and consumers.”
“This is a critical role, as the point of sale is undergoing dramatic change as it shifts from traditional payment acceptance to digital, cross-channel payment experiences,” Visa wrote in a company announcement released Friday morning.
Bitmain, the Chinese crypto miner maker, looks like it has reached an interesting point in its pathway to going public. There’s been little heard since the company filed to go public in Hong Kong in September, but now it appears that a new CEO has been hired and its two founders are leaving.
That’s according to a report from SCMP which — citing two sources — said Wang Haichao, Bitmain’s director of product engineering, has assumed CEO duties following a transition that began in December. Founders Wu Jihan (pictured above) and Zhan Ketuan will be co-chairs with Wang described as the “potential successor.”
The publication said that it isn’t clear when a new CEO will be named, or indeed whether an outside appointment will be made.
Bitmain declined to comment on the report when asked by TechCrunch.
The company, which is said to have been valued as high as $15 billion, certainly appears to have stalled with its IPO following the filing of an application on September 26. That document opened up a treasure trove of financial information regarding the company, which is estimated to supply around three-quarters of the world’s crypto mining machines.
Indeed, Bitmain’s IPO filing showed heady growth in revenue. The company grossed more than $2.5 billion in revenue in 2017, a near-10X leap on the $278 million it claimed for 2016, while sales in the first six months of last year surpassed $2.8 billion.
However, there were no figures for Q3 2018 and, since September, the price of Bitcoin and other cryptocurrency has plummeted further still, therein reducing the appeal of buying a mining machine and likely impacting Bitmain’s sales.
We reported that the company likely made a loss of around $400 million in that Q3 quarter. Things are likely to have been trickier still in Q4, as crypto prices dropped so low that mining companies in China were reported to be selling off machines because the cost of power to mine was lower than the reward for doing so.
Bitmain has diversified into non-mining services, to its credit, but its efforts to grow Bitcoin Cash — a controversial fork of Bitcoin — have been controversial and likely loss-making, to boot.
The price of Bitcoin Cash is currently $162 at the timing of writing, that’s down significantly from around $2,500 one year ago. That doesn’t bode well for Bitmain’s investment into the cryptocurrency, and it likely explains why the company has made layoffs, like others in the crypto space.
What a difference four months can make. The challenge for the company’s (apparent) new CEO is certainly a daunting one.
But Bitmain’s struggle isn’t unprecedented. Just this week, its closest rival — Canaan — was linked with a U.S. IPO. The company had planned to go public in Hong Kong last year but it allowed its application to expire as crypto market prices went south.
There’s plenty to watch out for in the mining space in 2019!
Editorial note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.