Permira takes majority stake in BioCatch at a valuation of $1.3 billion

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Biometrics Strong eyes on mergers and acquisitions, geographical expansion with support from private equity firms

Michael Novinson (Michael Novinson) •
May 2, 2024

Permira takes majority stake in BioCatch at a valuation of $1.3 billion
Gadi Mazor, CEO, BioCatch (Image: BioCatch)

Private equity giant Permira acquired a majority stake in BioCatch to accelerate its global expansion, product roadmap and overall growth of behavioral biometric intelligence.

Permira’s ownership will help Tel Aviv and Israel-based BioCatch expand its presence in key financial markets such as Germany, France, the Netherlands and Japan and pursue mergers and acquisitions to protect against AI-based threats, according to CEO Gadi Mazor . He said Permira will benefit from BioCatch’s existing position to protect 450 million users and monitor 10.5 billion sessions monthly.

“Permira has exactly the same mentality: thinking about growth, thinking about possible mergers and acquisitions and building a bigger company,” Mazor said.

All roads lead to mergers and acquisitions?

BioCatch has only completed a small acquisition transaction in 2020 so far, but with Permira’s support, it plans to pursue acquisitions that help detect generative AI-based impersonation attacks or other common forms of AI-based fraud, Mazor said. As fraudsters use AI to more convincingly impersonate users, Mazor says technologies and strategies that can distinguish between humans and bots are needed.

“Gen AI is a bigger threat in our space than using gene AI for defensive technologies,” Mazor said. “Our approach is to basically protect the end user against deception by the AI ​​generation. And that is a component that we find potentially interesting in mergers and acquisitions.”

Mazor said BioCatch’s use of behavioral biometrics to monitor user behavior and detect fraudulent activity is a key differentiator in the market. Unlike other types of controls such as passwords or two-factor authentication, biometrics provide comprehensive security without disrupting the user’s experience because it relies on passive monitoring to secure digital transactions, he said:

“Passively watching the user’s behavior is the only way that both increases safety and does nothing in terms of creating more obstacles or more friction during the journey,” Mazor said.

BioCatch competes against providers that focus on transaction monitoring, device signals and location signals in the broader online fraud detection market, but none of the company’s rivals have a strong focus on behavioral biometrics, according to Mazor. The company has a gross dollar retention of 99% and a net dollar retention of 125%, which Mazor says demonstrates strong customer loyalty and existing customer growth (see: LexisNexis, Experian, IBM, F5 Top anti-fraud technology).

BioCatch’s path to profitability

The company has been EBITDA and cash flow positive since last year and has not had to raise external capital since 2022, according to Mazor. All proceeds from the current transaction will be used to pay out existing investors, as BioCatch no longer needs external money to finance its operations, he said.

Founded in 2011, BioCatch employs 316 people and has had a significant ownership stake in Bain Capital since the private equity firm led the company’s $145 million Series C financing round in April 2020. Permira became BioCatch’s third largest stakeholder in the company after May 2023. investment, and a year later it became the controlling owner of BioCatch by purchasing shares of Bain and Maverick Ventures.

The company has been led since October 2021 by Gadi Mazor, who joined BioCatch in January 2018 as Chief Operations Officer and previously founded and led the mobile application platform Nobex Technologies for more than 11 years. During Mazor’s 31 months as CEO, BioCatch’s workforce has grown by nearly 55%, compared to just 204 employees at the start of his tenure, according to IT-Harvest.

Permira has a limited footprint in the cybersecurity market; Most recently, it cost Boston email security provider Mimecast private for $5.8 billion in May 2022. And two months earlier, Permira teamed up with fellow private equity firm Advent International and others to acquire pure-play consumer cybersecurity vendor McAfee for $14 billion in the month of May. largest cybersecurity acquisition of all time.