Investment - January 2022

The Joule General Partnership is pleased to announce the execution of Limited Partnership IV’s eighth 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 / IronVest
-Website / www.Ironvest.io
-Offices / New York and Tel Aviv
-Sectors / Fintech, Payments, Cybersecurity
-Founders / 2
-Year Founded / 2021
-Number of Board Positions Held by Janvest / One
-Total Janvest LP IV Investment / $2,500,000
-Total Size of Round / $10,000,000 First Close (up to $20,000,000 with Second Close)
-Notable First Close Co-Investors / Accomplice Ventures (Boston), Ulysses Capital (NY), Mark Wasserug - COO at The Intercontinental Exchange (NYSE: ICE), Adam Compton - Director of Investments at Rockefeller Capital Management, Howard Edelstein - Chairman of BioCatch, and an array of other leading strategic angel investors
-LP IV Ownership / ~4.0%

 DEAL DYNAMICS & RATIONALE
This deal is both unique and complex as it involves a merger of multiple technology businesses, including a Joule IV portfolio investment, into a single company run by a serial entrepreneur backed by Joule previously. Given that some of these aforementioned technology businesses are already generating meaningful annual revenue, both the size of the round and the corresponding valuation are significantly higher than our typical threshold but still present meaningful upside for the fund:

THE HISTORY
In February 2020 Joule IV led a $1.5MM pre-seed round in a company called Obsecure, which was developing a revolutionary new form of identity verification for digital transactions. The Co-Founder and CEO of Obsecure, Erez Zohar, was the former Chief Product Officer and General Manager of NICE Actimize, the anti-fraud arm of data security giant NICE (NASDAQ: NICE). Our job at Joule was to assist Erez in further validating his approach amongst financial institutions in the U.S. including, but not exclusive to NCR, Finastra, Amount, FIS, and Equifax. While Obsecure was receiving valuable feedback, which they translated into their product development, they were finding that each company wanted something different in terms of functionality and integration, which made nailing down product-market fit difficult. To assist with navigating this feedback, Erez brought on an advisor in the form of Avi Turgeman, a generational technologist and the Co-Founder/CTO of BioCatch, the global leader in behavioral biometric fraud prevention, which Joule seeded back in 2011.

In March 2020, as Obsecure was working on its product-market fit, Avi and BioCatch were closing a $168 million Series C from investors such as Bain Capital, Goldman Sachs, Citi, Barclays, and Royal Bank of Scotland. At that time, Avi began to ideate on a new security-first mobile banking concept based on more than a decade of working with some of the largest Financial Institutions (FI) in the world on their fraud and identity theft challenges. Through Avi’s validation process, he came to the conclusion that the best route to build this business would be to try and merge multiple complementary technologies on which he could ultimately build the core platform, thus saving millions of dollars and years of development. Those complementary technologies included Obsecure’s identity verification and authentication solution, as well as a Boston-based privacy-first mobile wallet, Abine, which was a mature revenue-generating business already. Given the complexity of this proposed merger, Avi approached Joule as both his first prospective investor and a fund that could advise him on how to appropriately execute the transaction.

After many months of discovery and negotiations, Obsecure and Abine were merged and IronVest was born.

THE MERGER OF OBSECURE
Joule IV portfolio investment Obsecure was a company in which the fund owned approximately 18.5% for it’s $1M investment back in 2020. The merging of Obsecure with IronVest was strictly an equity-based transaction whereby the fund would receive additional ownership in Ironvest for its investment in and the value of Obsecure’s pre-revenue intellectual property. Despite the standalone potential of Obsecure, we believe there is exponentially greater potential in merging this technology with Ironvest and its world class founding team, who will be joined by Obsecure CEO Erez Zohar as the company’s Chief Product Officer.

ROUND DYNAMICS
IronVest is raising up to $20 million as an initial round of financing. The first tranche, $10 million, is being invested as a seed round with preferred terms in which Joule IV is a $2.5 million investor alongside Boston-based Accomplice Ventures - an early investor in Abine, Recorded Future, SecurityScorecard, CoinList, DraftKings, and an array of other high performing security and financial technology businesses. This initial tranche is closed and funded.

The second tranche of $10 million is being reserved for strategic investors such as design partner banks and corporate investors. Numerous institutions are currently in advanced due diligence to gauge their interest and desired order of magnitude for an investment. Existing commitments to this second tranche include C-suite executives from numerous Fortune 1000 financial institutions in New York, Boston, and Atlanta. The second tranche is expected to close by Q2 2022.

While the size of the round is considerably larger than a typical Joule seed round, the company with its merged parts is already generating more than $1 million in annually recurring revenue and is expecting to hit $25 million in ARR within the next 36 months with this investment. In addition, IronVest already has a substantial team in place and is aggressively hiring for sales, marketing, R&D, DevOps, product, support, and compliance roles. More on the team below.

Worth mentioning is that this is not a team trying to validate their technology and approach, as is with most of our founders. This is a team that has more than a decade of experience solving security problems for leading banks around the world, understands the issue, and has advanced technical acumen to solve it.

TECHNOLOGY DESCRIPTION
Banks and Wealth Managers are under increasing pressure from their clients to deliver more functionality, capabilities, and services via their mobile devices. e-Commerce solutions, wider bank access, crypto and biometric wallets, and secure messaging and file sharing are just a few areas where FI mobile teams are trying to innovate; however, they are hamstrung in two areas:

1. Security and Privacy - bullet proof protection against identity theft and account fraud
2. Regulatory Environment - strict security and data protection regulations hamper what banks can offer in terms of mobile-delivered digital and non-cash transactions

Despite the extensive investment by FIs to create a more secure mobile environment for their customers, consumers are still losing billions to fraud and theft. One of the biggest issues in creating an appropriately secure mobile environment is the reliance on too many third party security products — they take too long to implement and often times create new vulnerabilities with their integration given their siloed approach to security. In addition, FIs are incorporating new multi-factor authentication and login processes, which ultimately destroys the user experience and discourages consumers from engaging further with the application.

IronVest is combining a number of proprietary technologies into a single security and privacy-focused super app designed to protect all things digital finance. Via IronVest FIs can have a single solution that provides the highest level of security and privacy in the market, while also facilitating hyper-secure and frictionless payments and transactions. The company’s patented mobile platform provides a hermetically secure infrastructure on top of which IronVest will be building a suite of apps including a Digital Wallet, Crypto Exchange, Financial Data Sharing, Protected Chat, and an array of other financial services. IronVest’s technology is also being purpose-built to assist FIs in meeting the strict regulations surrounding mobile banking — first taking into consideration security and privacy and only then adding digital finance capabilities.

MARKET APPLICATIONS
IronVest’s super app has numerous applications, which the company will explore further as they grow and scale:

• Wealth Managers, Corporate Banks, and Financial Advisors looking to service their HNWI or family office clients
• FIs looking to replace password managers and authenticators in order to offer more advanced functionality surrounding employee-facing applications
• Merchants looking for a zero-fraud, no chargeback payment feature
• Crypto traders looking for a secure and fully compliant mobile exchange
• Mobile app developers looking to license IronVest’s security and privacy-first platform as an SDK

MARKET ADOPTION
IronVest is already negotiating design partnerships and early customer engagements with a number of Fortune 500 U.S. banks. Unfortunately the confidentiality of those negotiations prohibits us from mentioning their names; however, should those relationships mature in the coming 12-18 months, each could be a 7-8 figure annually recurring revenue generating agreement with additional upsell and cross-sell opportunities.

 JOULE VALUE-ADD

1. Joule played an instrumental role in assisting the founders with the mechanics of the mergers and the corresponding investment round — acting as a trusted personal advisor to CEO Avi Turgeman with whom we’ve been doing business since leading BioCatch’s pre-seed round more than a decade ago
2. Joule connected Avi and his team to a number of tier one and tier two banks here in the U.S., as well as to a number of boutique wealth managers and multi-family offices in an effort to identify where the best design partner opportunities existed
3. Joule began making introductions to prospective hires
4. Joule introduced a number of prospective strategic investors for the second tranche of the round including Bain Capital and Amdocs Ventures, which is prioritizing the digitization of legacy banks in their new investment strategy

Brian Rosenzweig
Atlanta, GA
Brian@JouleVC.com

Dafna Winocur Biran
Tel Aviv, Israel
Dafna@JouleVC.com

Daniel Frankenstein
New York City, NY
Daniel@JouleVC.com