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Cognitive Security Case Study
Cognitive Security was a Czech startup that developed network behavior analysis tools using artificial intelligence. It raised $1 million in 2011 from Credo Ventures. In 2013, Cognitive Security was acquired by Cisco Systems. The acquisition allowed Cognitive Security's team of 30 engineers and PhDs to continue developing their technology as part of Cisco, expanding their market reach. Credo Ventures helped Cognitive Security professionalize its operations and supported its acquisition by Cisco, delivering a strong return for investors.
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Cognitive Security Case Study
- 1. 30 January 2013 VladislavJež Partner, Credo Ventures Local to Global: Cognitive Security Case Study
- 2. Esther Dyson Chair about us ReshmaSohoni 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 ForBuilding a Global Leader
- 4. University Spin-offs InCEE, 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 providerof 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 DUEDILIGENCE 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 businessneed - 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 ToInvest 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% Angelinvestor Founders Original, Aug-09 3% 12% 42% 44% Board members ESOP VC investors Founders Final, Feb-13 + earn-out
- 10. COSE Team InCISCO - 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 InCISCO - 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 CredoVentures 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