- CryptoMove, a cybersecurity startup led by a father-and-son team, just raised $US6 million in a Series A funding round.
- The round was led by Social Capital, a venture capital firm founded by ex-Facebook executive Chamath Palihapitiya.
- Social Capital was intrigued by CryptoMove’s approach to security, which protects corporate data in part by keeping it in frequent motion, playing a kind of game of digital hide-and-seek with potential hackers.
In 2017, venture capitalists invested more than $US7.6 billion into cybersecurity startups, helping flood the marketplace with an assortment of new software built to prevent malicious attacks before they happen – or fix them once they do.
Although CryptoMove was one of those cybersecurity startups that got funded last year, Mike Burshteyn, its CEO, doesn’t consider his firm to just be part of the pack. CryptoMove’s technology is superior to that of other cybersecurity companies and could change the way cybersecurity is done forever, he said.
“It’s certainly a crowded space,” Burshteyn said. “I don’t think there’s any question that security is overfunded. But we have no control over the timing of our invention.”
While CryptoMove’s name might make it sound like it’s yet another cryptocurrency startup, the company’s technology has nothing to do with bitcoins or blockchains. Instead its system is designed to secure companies’ data.
CyptoMove’s system breaks up data into small pieces and puts it into containers that are like rows of virtual vaults, Burshteyn said. Each vault contains a different piece of the data puzzle, and the system keeps the vaults moving at all times, rather than letting the data just sit in one place. Together, the techniques help keep data secure by making it difficult for the bad guys to figure out how to break in and steal the information.
The company’s software can run both on servers in corporate data centres and also on public cloud services.
‘It’s a father-son team, which traditionally, VCs get pretty scared of’
Founded in 2015, CryptoMove emerged from stealth mode and launched its product last year. Now, just a few months later, it’s announcing that it’s closed a $US6 million series A funding round at the end of last year that was led by Social Capital, the venture capital firm started by Chamath Palihapitiya, an early Facebook executive. Burshteyn plans to use the money to help grow CryptoMove from a scrappy 11-employee startup into a thriving software company.
But CyptoMove has already gone a long way from its beginnings.
The company got its start when Boris Burshteyn, Mike’s dad, recruited him to launch a business based on a security idea he’d been developing for a few years.
At the time, Burshteyn was working as an attorney, counseling large tech clients including Amazon and Google on how to handle cybercrime and data breaches. His dad, meanwhile, had had a long career as an engineer, including stints at Oracle and Cisco. Boris’ experience helped inspire his idea for securing data; he brought it to Mike once it became clear to him that the idea had market potential.
“My dad needed a business partner – it’s pretty much that simple,” said Mike Burshteyn.
It was this partnership that made Arjun Sethi, a partner at Social Capital, look more closely at the company.
“It’s a father-son team, which traditionally, VCs get pretty scared of,” Sethi said. “But we saw that they could work together for so long and build this type of product, so we decided we should take a deeper look.”
CryptoMove already has some big, notable clients
Today, CryptoMove is a growing business with clients including the US Department of Homeland Security, and French bank BNP Paribas.
Though many of CryptoMove’s clients are hesitant to say publicly that they’re using its technology – as Burshteyn puts it, “you wouldn’t necessarily want to advertise the type of lock on your house” – client testimonials were a big part of CryptoMove’s fundraising strategy.
For Sethi, really seeing how the product worked made a big impact in his decision to invest in the company.
“It’s pretty elegant in theory, but it’s really hard to execute,” Sethi said of CryptoMove’s approach to security. “It’s not a typical cybersecurity solution like everyone else, with a marketing engine behind the same product. It’s a product that has a very specific value proposition that a lot of people haven’t seen before.”
CryptoMove was excited to have Social Capital on board as an investor
Though CryptoMove raised $US6 million, the funding round was oversubscribed, meaning investors collectively wanted to purchase a larger stake in the company than it wanted to sell. So the company had some control over which investors it decided to take on board.
Burshteyn said he was encouraged by Social Capital’s work with Netskope, a cloud security company. Social Capital led the company’s $US5 million Series A round in 2013.
“We were looking for a top-tier firm to come in, lead the round, and help us take our business to the next level,” Burshteyn said. “Social Capital was very deep on the space. They got deeper on the business side and technically than other firms.”
In addition to Netskope, Social Capital has backed other enterprise companies including Box, Slack, and SurveyMonkey. The firm made waves in recent months by using algorithms rather than in-person meetings to help it decide which companies to back in early funding rounds. The firm believes the algorithm-based technique will help move funding to founders who might otherwise be discriminated against.
But Social Capital didn’t need its algorithms to convince it to invest in CryptoMove. Instead, the firm’s team met with the company on multiple occasions, at different stages of its growth.
Burshteyn said he wouldn’t have it any other way. Social Capital’s hands-on and “team-based” approach was a big factor for him in deciding to work with the firm.
“They were helpful before the round even closed so we saw a lot of value,” he said. “They have started moving the needle for us.”