Telstra Ventures has invested in third party risk innovation company CyberGRX. The announcement has been picked up in a profile article in the The Australian newspaper:
Nothing ventured, nothing gained
Telstra Ventures, Telstra’s independent venture capital arm backed by US private equity heavyweight HarbourVest, has expanded further into the $100 billion cyber security industry as it pursues ambitions to double in size in the coming years.
The venture capital group has taken a stake in the Denver-based cyber risk exchange firm CyberGRX, which allows clients to view how their vendors, partners or customers are addressing their security requirements and automates the process of performing risk assessments.
CyberGRX last year raised $US30 million ($43m) in Series C funding led by a string of big global venture capital players including GV (Google Ventures), Scale Venture Partners, Bessemer Venture Partners and The Blackstone Group. Telstra Venture’s investment in CyberGRX, which is believed to be worth $US5 to $US10m, brings to more than 10 the number of global cyber security firms the group has invested in over recent years.
“Cyber Security is a $100bn industry and 63 per cent of data leaks come from third party providers. We like the way CyberGRX approaches their solution with analytics and the AI (artificial intelligence) model they are using to help customers protect themselves,’’ Telstra Ventures Australian managing director Matthew Koertge told The Australian.
He said Telstra could become a cornerstone customer for CyberGRX in the local market.
“One of the things we really liked about the company is that the team consists of security experts who have built 15 companies in the past. Our hope is that we will be able to help them plug into Telstra’s ecosystem of customers,’’ he said.
The move brings to $500m the value of investments made by Telstra Ventures in 60 companies since it was established by the telco’s former boss David Thodey in 2011. The investments, worth an average of around $US8m, are spread across a range of sectors including cybersecurity, drones, data analytics and media.
Mr Koertge said doubling the size of the business was “absolutely possible”.
“We will continue to do 10 to 12 investments per year. As we continue to raise more capital we will continue to scale the business. We have a fund with a three-year investment period. So we are just coming to the end of our first year and have two years before we raise another fund,” he said.
“We are hopeful Telstra and HarbourVest will continue to fund our future rounds but we do have an interest in bringing new investors into the mix.”
While Telstra Ventures has a broad investment mandate, it has so far favoured investing in later stage tech companies.
“Typically we like to invest in businesses that have a proven product, management team and significant customers. Our investments are companies with millions of dollars of revenue that can take their proven solutions into our sales channel,’’ Mr Koertge said.
Not all the initial investments have been successful. The group took a small stake in video content firm Ooyala in late 2012 and invested more money in the company a year later. By mid-2016, Telstra was forced to write down the value of the business by $246m as chief executive Andy Penn acknowledged Ooyala’s video business had not been successful. It ended up losing $500m.
In July last year Telstra sold a portion of its ventures arm to HarbourVest for $75m. It now has 10 investment professionals.
Mr Koertge revealed the group’s 60 portfolio companies had generated more than $300m of revenue between them.
“We have definitely got better at our processes. With every transaction we are lifting the bar on our due diligence. We have expanded our team. We have also hired a data scientist who worked at LinkedIn to improve our investment process,’’ he said.
While he declined to give numbers, he claimed the returns to Telstra and HarbourVest had been “quite good”.
“We have had liquidity events from 13 companies. From those there have been some interesting investment returns,’’ he said.
They include software company Elemental, which was acquired by Amazon, security firm Elastica, which was purchased by the Bain Capital-backed Blue Coat Systems and web server NGINX, bought by F5 Network.
Mr Koertge said the relationship of his firm with Telstra remained strong: “Telstra values the way we are bringing new technologies and solutions into their ecosystem and customer base.”
THE AUSTRALIAN