*Cognitive Security Case Study* _How venture capital can help to build the leading IT security company._

1. 30 January 2013
Vladislav Jež
Partner, Credo Ventures
Local to Global:
Cognitive Security Case Study

2. Esther Dyson
Chair
about us
Reshma Sohoni
Board Member
advisory board
Stuart Chapman
Board Member
€18 million
raised from over 30 high-net-worth
individuals
sold to CISCO Systems sold to Brand Embassy
3 Partners + 2 Associates
office in Prague
Credo Ventures - Credostage 1 Fund - /2011/

3. Key Factors For Building a Global Leader

4. University Spin-offs In CEE, Opportunities And Challenges
Observations and
experiments are
performed
Research
University develops
preliminary
commercialization
strategy
Market
assessment
University may
pursue patent
protection
Patenting
University
proactively
approaches
companies,
entrepreneurs, and
investors to bring
the technology to
market
Prospecting
Startup is created
and compensation
to university may
involve fixed fees,
milestone fees,
royalties, equity,
and other forms
The deal
Source: OTC (University of Texas at Austin)
5 Steps of Technology Commercialization

5. Cognitive Security
a provider of Network Behavior Analysis products and services. It uses advanced
Artificial Intelligence techniques to complement current firewalls and Intrusion
Detection/Prevention security systems and to protect its users against modern
sophisticated network attacks.
Quick pitch:
experts in Network Behavior Analysis
Location:
Prague, Czech Republic
Funding:
EUR 1 million (4/2011)
Exit:
sold to Cisco Systems (2/2013)

6. COSE Timeline
COMPANY
ESTABLISHED
LICENSE
AGREEMENT
COGNITIVEONE
LAUNCHED
SILICON VALLEY
COGNITIVEONE
2.0
DUE DILIGENCE
START
BUSINESS PLAN
DRAFT
TERM SHEET
SIGNED
VC
INVESTMENT
CISCO OEM
DEAL
VP SALES
HIRED
BULL
DEAL
HEAD OF
SALES HIRED
US NAVY
DEAL
NEW
STRATEGY
BREAK-EVEN
20
EMPLOYESS
TELCO
DEAL
FUNDRAISING
START
TERM SHEET
SIGNED
EQUITY
BUYOUT
EXIT
NEGOTIATIONS
DUE DILIGENCE
START
ACQUIRED
BY CISCO

7. Investment Case
The business need
- Sales & marketing expansion
- Research & development
- Access to international networks
- Improve corporate governance
Actions to create lasting value
- Active help since the first meeting
- Built a broad and competent
ownership structure
- Strengthening of the sales team
- Active board-level work
- Buyout of a passive angel investor
- Support in exit process
Outcomes
- Built the leading IT security
company
- The company now employs +30
people
- Expansion to global market that
would have taken years organically
- Negotiation with top tier VC
- Sale of Cognitive Security to Cisco
Systems after 20 months from the
investment
- Large return on investment

8. Key Factors To Invest
People
Prove it
- strong product/market fit
- first revenue
- founders‘ dedication
- angel funding
Problem
Payment
- security as a service (SME)
- $ 2/4/5+ k/year
- enterprise and OEM
- $ 30/100/250+ k/year
Potential
Polymorphic
malware
APT
Zero-day
attacks
2009
Intrusion Detection/Prevention
market segment
2013
$3.5b
$2b

9. Shareholding Structure Development
40%
60%
Angel investor
Founders
Original, Aug-09
3%
12%
42%
44%
Board members
ESOP
VC investors
Founders
Final, Feb-13
+ earn-out

10. COSE Team In CISCO
- COSE sales operation taken up by
CISCO
- COSE provided as CISCO technology
- Further integration with other CISCO
security technology
- COSE will be integrated on the cloud
- COSE will support CISCO SIO

11. COSE Team In CISCO
- International team of 30 young
engineers, developers and scientists
- 5 (+5) Phds in Computer
Sciencs/Artificial Inteligence
- Martin Rehak – Principal Engineer
- Michal Pechoucek – Director of
Enineering
- Based at Charles Square, Prague

12. Thank You
Vladislav Jež
Partner
Credo Ventures
Křížová 2598/4, Prague 5, 150 00
Czech Republic
http://www.credoventures.com
email: jez@credoventures.com
mob: +420 737 238 278
http://cz.linkedin.com/in/vladojez
@CredoVentures