Fintech Investments

ID Experts Light Up Portland

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Investor appetite for fintech start-ups has waned recently while concern for cybersecurity is growing. While PwC reports cybersecurity as the fourth greatest health issue in 2016, the KPMG Fintech reports for Q2 shows investment to VC-backed fintech deal activity fell to a five-quarter low in Q2 2016.

News out of Oregon implies significant appetite among investors for cybersecurity firms. A lot has been happening for a firm called ID Experts.

Early in August, The Oregonian reported that a private equity firm had paid more than $50 million to acquire Tigard-based ID Experts, a cybersecurity firm founded in 2003. Early in the year, the company raised $5 million from backers that included BlueCross BlueShield Venture Partners and Oregon-based Rogue Venture Partners. The company hired a new CFO in March.

In 2014, ID Experts reported $22.8 million in revenue with 59 employees, and the sale provided a hefty return for investors.

ID Experts responds to data breaches and provides identity protection services to organizations and individuals. It defends against hacking and identity theft by monitoring for unusual activity. Early warning helps clients take immediate action if they are under threat.

The new owners of ID Experts are Peloton Equity and Trident Capital. Prior backers have also reinvested after raising $5 million in January. All of the company’s 88 employees are to be retained, as is Bob Gregg, the chief executive.

But more recent news is that ID Experts just raised $27.5M from venture funding on August 18, and has raised a total of $32.5M in two rounds with four investors.

And it doesn’t stop there. The private equity funding, which, according to Oregon Live, will “cash out some of its current owners while injecting more capital into the business,” came at the same time as a new spinoff from ID Experts emerged called Radar. Radar itself has already raised $6.2 million — more on that a bit later.

Radar launched just this week with 30 employees and is backed by some of ID Experts’ original investors. Radar also helps clients with cybersecurity and data breaches, but is more focused on complying with government regulations and determining whether online security breaches should be reported to the government authorities.

The emergence of Radar as a separate entity is not a complete surprise. Mahmood Sher-Jan, CEE for Radar, said that it was always the plan to separate Radar. He said the timing with the sale of ID Experts was coincidental.

According to Sher-Jan, “Being independent gives us the agility of not having to be competing for resources in a bigger organization.” He added that although Radar’s funding sources are longtime ID Experts investors who are also owners of the new company, ID Experts has no stake in Radar. The capital Radar raised will be spent on technology, sales and marketing.

An insider estimated the value of ID Experts at over $50 million.

Investments for 8.19.2016

Not much of an August lull in investment activity, at least as measured by the strength seen in funds flow across both the B2B and FinTech arenas. The total tally for the week came in at $1.8 billion, which represents a return to billion dollar plus activity. This time around the FinTech wagon pulled weight, but only at 67 percent of all investment activity for the week that ended on Aug. 19th. That lent a fair amount of weight to the B2B space, which added the remainder, of course, at roughly 33 percent.

In the largest deal of the week, United Bankshares said it would buy Cardinal Financial for $912 million, in a transaction that would bring United into the forefront of big banks in the Washington DC region, with scale gleaned from Cardinal’s 30 branches and $4.2 billion in assets. This transaction, of course, would fall under the traditional banking sector.

JDA Software said it would opt for a $570 equity investment from Blackstone Group and New Mountain Capital, a decision that seems to take an acquisition by Honeywell, much rumored in the business press, off the table. That new capital infusion, according to JDA, will fund expansion and product development. The equity investment is expected to be completed by the fourth quarter of this year.

In keeping with the tech bent of the JDA deal, the next largest transaction that came into play figured squarely in the FinTech realm, as loanDepot announced a closing on a $150 million capital transaction, a move that comes after the firm scuttled IPO plans.

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