TrustTech — Preserving Trust in Digital Ecosystems (Part 1)
Why TrustTech and Why Now?
We at G+D Ventures consider ourselves to be theme-driven. But what does that really mean? Well, we recently closed a €50 million co-investment vehicle with Giesecke+Devrient (G+D) and the European Investment Bank (EIB). The purpose of this vehicle is to invest in European companies working on trust-enabling technologies. That is our theme: EU-based TrustTech startups.
Let’s unpack this a little bit. The second part of our theme contains an arguably novel term — TrustTech. It stands for Trusted Technologies. We at G+D Ventures use the term TrustTech to refer to those technologies aimed at securing and restoring trust in our society and digital ecosystems. It is a rapidly developing field of innovation that we predict will continue to grow and develop.
TrustTech expands the traditional definition of cybersecurity to include technologies that promote trust across all layers of the Trust Backbone: infrastructure, identity, regulation and ethical.
But, what is the Trust Backbone? In a way, it is the fabric that makes up the digital world, connecting everything and everyone in it. Digital banking, e-commerce, remote collaboration and B2B transactions are only some examples of everyday activities possible through a network of interconnected individuals, businesses, governments and devices. Everyday millions of gigabytes of data, some very sensitive, are exchanged and stored through this giant mesh that we call the Trust Backbone of the digital world. It is not just the digital world that is at play here. The Trust Backbone also extends to the physical world. With increasing digitalization, entities that were traditionally in the physical domain, such as power plants or hospitals, are joining the digital ecosystems.
We at G+D Ventures see the Trust Backbone as consisting of four layers: Digital Infrastructure, Identity, Regulatory and Ethical. Each of these layers has a specific role for ensuring the security and reliability of the ecosystem.
The Digital Infrastructure layer forms the basis of the Trust Backbone by enabling the exchange of data between parties through computer networks, servers, software applications and devices. TrustTech is working on a variety of solutions to ensure secure exchange and storage of data on the Digital Infrastructure layer. Secure Data Collaboration allows working on fully encrypted data or in fully encrypted environments while never putting the data at risk. Ensuring end-to-end integrity of data minimizes the risk of data being stolen, lost, destroyed or contaminated during collaboration or data transfer between parties. In combination with classical cybersecurity solutions like data encryption, secure data collaboration is a vital part of the digital infrastructure layer. Examples for secure data collaboration are homomorphic encryption and confidential computing.
The Identity layer ensures that only authorized parties are participating in the data exchange happening on the Digital Infrastructure layer below it. TrustTech is able to build on existing techniques and bolster identity and access management (IAM) as well as ID verification solutions. Many of the traditional IAM solutions rely on username and password — TrustTech enhances these solutions. Biometric features in IAM solutions are harder to breach and less prone to social engineering. Biometrics can also be used to detect fraudulent behavior in transactions. Liveness detection, a TrustTech solution for remote verification scenarios, is another technique for boosting identity verification systems. Aside from improving existing techniques, TrustTech also brings new concepts to the table. One such example is Self-Sovereign Identity (SSI) residing on the Identity layer.
The Regulatory layer embodies all the efforts to enforce regulatory frameworks put in place by governments to protect the basic rights of transacting parties such as data privacy, information transparency and fair dealing. Examples of such laws on the European level are the 5th Anti-money Laundering Directive, the GDPR, Markets in Crypto-assets (MiCa), Electronic Identification, Authentication and trust Services (eIDAS), the Cybersecurity Act, and others.
The Ethical layer observes and maintains societal values not explicitly covered by the Regulatory layer. Examples include ensuring the ethical usage of AI in decision-making, with solutions such as “Robustness of AI” or “Explainability of AI”. The Ethical Layer also ensures that information is correct and reliable — a critical asset in the era of “Fake News”.
But why do we even need TrustTech? Isn’t cybersecurity alone sufficient? The threat landscape in 2023 has evolved beyond the capabilities of firewalls, anti-virus software and other cybersecurity tools. The increasing number of connected entities in the digital ecosystem has exposed the cracks in the usual cyber defense methods. There is a need for a more holistic approach to defending the entire ecosystem. In a world where our private data, identities, money, security, health and human dignity are constantly challenged, trust is the currency.
With TrustTech explained, we now come to the more straightforward part of our theme — the EU. Tech hubs have recently been popping up all over Europe and the region seems to have a world-class university at every corner. More importantly, the EU is a pillar of trust and a major advocate for trust-preserving and trust-enabling technologies. This has created fertile ground for some of the best-in-class TrustTech startups to flourish. In fact, the number of TrustTech startups is constantly on the rise, with an average YoY growth of 20% in the last 5 years. The capital invested in the space has been steadily increasing since 2015, with an average YoY growth of 70% since 2018. Most of this funding came from generalist funds, investing across the entire spectrum of startups. Given the “Deep-tech” character of this space, TrustTech is missing “smart money”, i.e., investors with meaningful venture and industry networks and TrustTech know-how. We see very few such dedicated funds in EU-27 able to provide such specialized expertise. Considering that the TrustTech space in the EU is still in the nascent stage (see breakdown by deal type in pie chart below), the market has considerable room for growth and investment.
And there it is — the first overview of the Trust Backbone within the concept of TrustTech in the EU. Now, as a theme-driven TrustTech investor, we at G+D Ventures have a lot more to say about this rapidly developing field of innovation. That’s why we planned a series of deep dives into each layer of the Trust Backbone.
Be on the lookout for our upcoming post about how TrustTech helps restore trust on the Digital Infrastructure layer.
Check out our website to find out more about G+D Ventures and our Portfolio!
G+D Ventures is a European TrustTech investor based in Munich, Germany. We invest in predominantly early-stage TrustTech startups developing solutions for greater security and trust in the digital world. TrustTech expands the traditional definition of cybersecurity to include technologies that promote trust across all layers of the Trust Backbone: infrastructure, identity, regulation, and ethics.
