Investment - July 2022
The Joule General Partners are pleased to announce the execution of Limited Partnership IV’s tenth investment in an Israeli founded emerging technology company. Below you will find information about the business and corresponding investment. We welcome your questions and feedback.
DEAL SUMMARY
Company Name / AccSense
Website / www.AccSense.io
Offices / Raanana, Israel
Sectors / IT & Cyber Security
Founders / 3
Year Founded / 2021
Number of Board Positions Held by Joule / One
Total Joule LP IV Investment / $2,000,000
Total Size of Round / $4,000,000
Notable Co-Investors / Benny Czarny (Founder of OpSwat), Avi Turgeman (Co-Founder & Fmr. CTO, BioCatch and Co-Founder & CEO, IronVest), and Gefen Capital (Israel)
LP IV Ownership / 11.36%
TECHNOLOGY DESCRIPTION
According to Gartner, the Software-as-a-Service (SaaS) market has grown 5x in just the last seven years, makes up 70% of total enterprise software use, and is estimated to be worth more than $170 billion. This growth has been fueled in large by the mass adoption of Cloud-delivered SaaS applications such as Salesforce, Slack, Dropbox, Adobe, and Zendesk by businesses of all sizes. While small organizations of 50 or less employees are only using on average 16 SaaS applications, large organizations with 1,000+ employees are using on average 177 SaaS applications. Now take into consideration that each individual employee, customer, or partner, for every organization needs their own digital identity (username, password, and permission) for each application. We’re talking about more than 50 billion digital identities worldwide. Behind each identity, or tenant, is all the data and network access for each of the aforementioned individuals, which is why account takeover (logging in) is a a first stop for many hackers costing organizations more than $25 billion annually. Leading the charge in identity security and management are Google with their Cloud Identity Platform, Microsoft’s Active Directory, and Okta (NASDAQ: OKTA), which has built their business entirely around innovations in this market. While Google, Microsoft, Okta, and others work to keep SaaS applications secure, account takeover still continues to be a problem with 83% of companies reporting an access-related breach over the last two years. When these breaches occur, tenant or multi-tenant access is blocked, and in many cases, either held ransom or deleted entirely, which means the loss of valuable tenant data that is, for the most part, unrecoverable. By the way, this is the same situation if an individual or group of individuals within an organization accidentally deletes one or more application tenants. This problem has contributed to the rise of various cyber and identity resilience (recovery) solutions. The challenge with these solutions is that they cover just a handful of individual SaaS applications. For example, OwnBackup with its $4b valuation, is dedicated exclusively to ‘backing up’ Salesforce while Datto, which was acquired for $6.2 billion this year, services only Microsoft 365 and Google Workspace. In our due diligence, we spoke to the Head of IT for Monday (NASDAQ: MNDY), an early customer of AccSense, who told us they use over 200 SaaS applications but can only find a backup solution for a small fraction of them. In other due diligence conversations, we received feedback that even if some of these SaaS applications offered their own recovery capabilities, organizations would be hesitant to rely on them with the thinking that if one of these applications was compromised, that could (and likely would) have a major impact on their backup functionality. This further reinforces the idea that third party Digital Identity Resilience is soon to become a ‘must have’, especially for mid-size to large enterprises.
Enter Tel Aviv-based AccSense, which aims to become the market leader in Digital Identity Cyber Resilience for SaaS Applications. Their state-of-the-art platform is designed to automatically and in real-time build a ‘digital twin’ or ‘secondary system’ of a SaaS application with ‘any point-in-time’ restoration. Their approach allows for users and their organizations to access a safe and fully operational tenant in the event of account compromise or deletion. In addition, organizations can regain control in hours versus weeks, reduce expensive downtime, and ensure full compliance with security regulation so that they can continue to service their customers and partners.
MARKET ADOPTION
AccSense is taking a two-pronged approach to market adoption. The first approach is to focus initially on building the market’s only resilience platform for Okta with their 14,000 customers and hundreds of millions of users. Just on Okta alone, AccSense could build a significant business with existing customers and prospective customers including, but not exclusive to Fiverr (NYSE: FVRR), Monday (NASDAQ: MNDY), Twilio (NYSE: TWLO), WalkMe (NASDAQ: WKME), Riskified (NYSE: RSKD), and Forter (pre-IPO).
The second prong to their go-to-market is to expand their offering to high user count applications such as Workday (NASDAQ: WDAY) with more than 55 million users or Jamf (NASDAQ: JAMF) with over 60,000 customers. The emphasis would be on laterally moving into SaaS applications that heavily rely on Okta already and where integration would be easier from a technical standpoint.
EXECUTIVE TEAM
One of AccSense’s biggest advantages is the experience and domain expertise of the founding team. Prior to AccSense, the CEO, CTO, and COO had founded Teraworks, Israel’s largest Okta integrator. AccSense was born out of their experience in the market working to help the country’s leading enterprises develop and implement their SaaS security infrastructure on Okta. There is perhaps no better team anywhere to build this type of solution.
JOULE VALUE-ADD
1. Led a pre-round recapitalization effort to rectify some significant cap table problems created by the company’s overly aggressive pre-seed investors. This work required putting together an appropriate sized round with corresponding valuation, ensuring the founding team’s ownership was restored to market standards, and establishing a corporate governance structure that would enable the company to raise future rounds from tier one investors.
2. Led engagement with renowned cyber executive Benny Czarny to both encourage his participation in the round, but also ensure his involvement at the board level to maximize the value he can bring from a go-to-market and customer introduction standpoint.
3. Syndicated part of the round to a group of cyber-focused Angel investors led by Avi Turgeman, Co-Founder of two Joule-backed companies, BioCatch and more recently, IronVest. This group has the ability to play a material role in product development and go to market execution, while also bringing to the table blue chip investors for later funding rounds.
4. Quickly established ourselves as trusted advisors to the CEO who was conducting his first capital raise and required guidance on raising the remainder of his round
