Proud parents – and midwives – of a unicorn called BioCatch

Founders can rarely achieve success without investors, but we are shakers, not movers

SUCCESS HAS MANY parents – sometimes too many.

The success of a startup belongs primarily to its founders and the team that builds the company. Investors play an essential role, but we are more like midwives. We help to nurture the nascent opportunity and can help it to ?reach a term sheet, but we can not take the major credit for carrying the new-born business through the periods of gestation until it is ready to exit. The company’s own executives put in the lion’s share of the labor and most of the sweat. But when the time comes, investors can help to ensure that maximum value is delivered to all the proud principals.

Founders can rarely achieve success without investors, but we are shakers, not movers. Investors provide the financial fuel that enables great innovators to transform their dreams into sustainable businesses that can improve the world. Nothing gives an investor a greater feeling of satisfaction than when everything aligns to build a startup into a fully-fledged, profitable company serving its customers and shareholders.

Such satisfaction rarely comes quickly in the venture business, which is a long-term commitment. The average startup takes about 10 years from founding to IPO, so over the course of perhaps a decade or more, successful investors must be able to pick out the good teams, with good ideas and solid business plans, help grow the business, and guide them toward a successful outcome – often several years into the future.

I have been thinking about this subtle relationship between investors and founders since the announcement in early May that Permira Growth Opportunities II, a fund advised by global private equity firm Permira, has agreed to acquire a majority position in BioCatch, one of the stars of the OurCrowd startup portfolio. At the same time, existing shareholders Sapphire Ventures and Macquarie Capital are increasing their stake in the company, bringing its valuation to around $1.3 billion.

For those who first invested in BioCatch via OurCrowd in 2014, the company’s new valuation implies a gross multiple of more than 10X on their original investment.

When OurCrowd first offered BioCatch to our investors, the company had no customers – just an idea of such clear brilliance that it seemed likely to succeed in the right hands. The basic premise of BioCatch’s business is that a mobile phone or keyboard user can be identified by the way they tap their phone or type – a digital fingerprint made up of a pattern of clicks and movements unique to each user. By successfully analyzing and capturing these taps and keystrokes, BioCatch can identify real customers while exposing bots and fraudsters.

Today, the company is a leader in behavioral biometric intelligence and advanced?fraud?detection, using patented artificial intelligence, data science, and machine learning technology to analyze a user’s cognitive intent and deliver highly accurate insights as to the legitimacy of their identity, motivations, and behavior. In 2023, BioCatch expanded its mission to include a proactive approach to fighting financial crime with the launch of predictive, behavior-based mule account detection.

Founded in 2011, the company’s ARR grew by 49% year-on-year to more than $100 million in 2023 when it attained EBITDA profitability. Today, BioCatch has more than 10,000 customers, including more than 100 of the world’s largest banks, fintechs, and telecommunication companies, who use its technology to fight?fraud while facilitating financial crime prevention and decision intelligence sharing. It tracks 70 million users recording up to 40,000 operations each second.

The acquisition of a controlling interest by a consortium of private equity funds and large investors led by Permira is another milestone in the company’s impressive journey,which is far from over.

Alongside the financial success, OurCrowd’s history with BioCatch is a prime example of the role that an engaged investor can play in the life of a growing company.

In the decade since we first invested in BioCatch, we have brought three CEOs from OurCrowd’s community to the company, each of them the right person to lead the business at that stage. The first,? Ron Moritz,? took the helm of the company following the death of its founder and helped stabilize the company. ?Then came Howard Edelstein, who joined the BioCatch board as OurCrowd’s representative, becoming the company’s chairman and ultimately its CEO. Howard played a pivotal role in building the business and bringing in Bain Capital as the company’s first private equity investor in 2020.

The third was Gadi Mazor, the company’s current CEO, who previously worked at my company Vringo and then was part of the founding team at OurCrowd. Gadi’s strong management skills have helped the company chart its recent course toward its unicorn valuation and the current deal with Permira, Macquarie and Sapphire.

In addition to supplying investment capital and key personnel, OurCrowd played an important role in helping BioCatch secure its first commercial deal with the Royal Bank of Scotland, just one of many introductions and assists with major customers.

A little over a year ago, we were able to help the company – and provide welcome liquidity to OurCrowd investors – by selling some of our equity holding to Permira, helping to get this strategic investor on the BioCatch cap table for the first time, which resulted in Permira’s decision to lead this current transformational Private Equity round.

Now that Permira has vastly expanded its equity position and taken a controlling interest in the company, OurCrowd faced a critical decision: whether to exit our entire equity position at a handsome profit or hang on to a significant stake in order to benefit from future growth as the new owners help guide the company to new heights. Our decision: sell some of our holding, enabling OurCrowd investors to realize a healthy return on their initial stake, while maintaining a position in BioCatch as it continues to grow.

We believe that there will be more value to come in the company’s future and that our decision to retain a real piece of our holding will pay off. Meanwhile, we have helped build the team, expand the investor base, and secure customers for the company. We fully intend to continue to add value all the way to the finish line.

Having worked closely with Gadi, I have full confidence that he can lead BioCatch to even greater achievements. The technology is brilliant, the product is a market leader and the timing is perfect. The company is fast becoming the gold standard for anti-fraud detection in financial institutions. Even though OurCrowd is no longer among the largest shareholders, we will continue to support the company and we hope that we and our investors will enjoy its growth under the guidance of its impressive private equity shareholders.

About ‘Investors on the Frontlines’

I’m the CEO and Founder of OurCrowd, the global equity investment platform that gives individual accredited investors access to private market startup deals alongside top-tier VCs. If you are an investor, private family office or financial advisor, subscribe here for my biweekly commentary or follow me on Twitter. I welcome your comments in the response section below.