Why We Invested In Buguroo?
Why our fund Conexo Ventures made its first investment in Buguroo; a Madrid-based cybersecurity startup?
I have had the chance to be involved in three Boston Fintech startups in the last 16 years as co-founder, founding team and founding investor. The three startups all raised very significant rounds of funding and all had solid exits or well… two of them at least, the last one sold to Samsung to create Samsung Pay for $250M. Our deal with Samsung was to help them grow Samsung Pay in the US which we succeeded by getting them a significant base of users and many highly engaged value-added services but after 3 years of earnout period I felt it was time to do something else.
Having been angel investor and learning from successes and failures, I wanted to invest in a smarter and more structured way. Like any other businesses I was involved in, I was looking at focusing at very targeted markets ideally underserved with lower valuations than the ones I was used to in the US, though with exceptional Technology and entrepreneurs. I was tempted to focus my attention in western Europe where I was getting impressed by the number of quality deals struck by one of the leading Central / East Europe Venture Firm SpeedInvest led by a college friend Stefan Klestil where I am a Limited Partner. They had incredible deals in Germany and UK for sure, but equally as interesting deals in Turkey and even Slovenia.
Contacted by a former Nokia colleague and MIT Sloan business school classmate Isaac de la Peña, I decided to switch the focus to South Europe around technology companies in Fintech and AI with the potential to impact the US market. A number of incredible deals just had started to be effective in Spain and Portugal with powerful startup tech hubs in Barcelona, Madrid and Lisbon, and successful startups in the shared economy like Cabify with over $400M in funding, or Badi, or Spotahome, or 21buttons all of them with mega-rounds by top VCs.
With a 3rd partner Javier Artiach incredibly well connected in the Spanish business community we launched Conexo Ventures this summer. After analyzing more than 300 tech startups we concluded a deal with GED Capital, one of the largest Spanish Private Equity company.
Out of the 300 startups, only about 5 really made the cut for us, and 1 in particular stood out: Buguroo, the Spanish startup leader in banking cybersecurity.
In startups there are so many criteria to become successful but a few really make the difference.
Although we invest in Technology, “it is not about the Technology”, and in Cybersecurity which is Buguroo’s Focus there are so many good companies and Technologies and they evolve year on year. Startups in the field are usually found in Israel or in the US so we nearly skipped. We invest in Founders’s first.
We were quickly attracted by the personality of the founder and CEO, Pablo de La Riva who started in Cybersecurity at 12 years old when his parent’s computer was hacked and launched his first cybersecurity company at 21 already an expert. We seek out entrepreneurs who are passionate in their subject and transmit a real faith in their project to their potential investors, team and also customers.
Pablo was hard to get a hold of… constantly on the move these months all around Latin America coming back each month with an amazing pipeline of opportunities and closed businesses.
Pablo has been tacking a significant problem that we had no idea was so live until we started to see data from Digital banking sessions from major banks: Identity Theft for digital banking. I knew I was figuratively “getting into the Dark side” by moving from startup entrepreneur to venture capitalist, but I had not idea I would learn so much about the real Dark Web by studying cybersecurity.
It is a large underserved and ever-changing market: In 2017 alone, $16b was defrauded with a cost of $1.150b for businesses according to Gartner and Forbes.
Buguroo guarantees throughout the user’s entire session that users are who they claim to be, and are not being manipulated. They build agressive Hacker Countermeasures to identify compromised end users, stolen data and the cybercriminals’ Next Moves. This is vital in ebanking.
Sit down in a session with Pablo and his team and sit tight…you can watch live as thieves attempt to methodically impersonate you. Watch as the Buguroo team thwart these criminal intentions by attacking not just the thief but his trusty malware, botnet and command and control centers on which they rely.
We went deep with Isaac our Tech Guru into how Buguroo was leveraging Deep learning advanced learning technique for better detection of fraud and reduction of false positives, how the solution leverages a combination of projections: environment- and cyber-defense, biometry and omni-channel mechanisms combined and how the solution is friction-less: compatible with all devices to protect 100% of users.
This we really liked. We saw many incredible solutions that were working just on PCs or just with certains Oss and I could only relate to LoopPay which we designed initially to work on almost 100% of mobile devices (Android and iOs) and on almost 100% of merchants with no changes needed on their side for a mobile payment to happen securely.
We were then not that surprised that after 4 years of development the solution is deployed by major banks in spain and Latin America: Live with Caixabank-Spain (14m users), BBVA-Colombia (500k users), BBVA-Peru (350k users) and many more….and the pipeline is impressive with a very sound per user license business model. As importantly we have been watching how successful they were to knock down the competition of some renowned players like IBM or Threatmetrix.
Behind Pablo we saw 8 years of R&D and early backing by one of Spain top tier venture fund’s, Inveready with which we are delighted to collaborate.
When we see companies like this we try to understand if we invest how could we make a difference and if we do can.
In the case of Buguroo we believe we already have. Buguroo has 3 key challenges:
- No1 consolidate Latin America. Having spent 6 years in Latin America selling to some of the major banks as GM for smart card leader Gemplus/Gemalto we have already.
- No2 reinforce the team: we could already bring some key employees through our network.
- No3 expand their offer internationally: we hope that in the coming months, we will be able through our network to help them create a viable strategy to make inroads in the US Market and get some Series A or B US investors on board.
Buguroo has a highly scalable technology can be rolled out geographically. Cybercrime changes from region to region but with Buguroo’s active biometric cybercrime prevention technology that does not matter so they have a huge potential to expand internationally with stable solutions in wide deployments in key banks.
As a conclusion, we would like to compare Buguroo to another prominent south Europe AI Cybersecurity startup Feedzai that started from a Lab from the University of Lisboa and decided to move to the US in the valley 5 years ago. They are today a semi-unicorn valued close to $600M. They are in a different segment as Buguroo: They marry machine learning-based analysis of unstructured data such as emails and customer service calls with structured data from transactions to help firms fight credit card and payment fraud and have investors such as Capital One, First Data, and Citibank and selling to the main banks in the US.
We hope and believe that Buguroo will follow the same path and be assured that we will be effectively helping. Good Luck Pablo and Chapeau!
