30 January 2013

Vladislav Jež Partner, Credo Ventures

Local to Global:

Cognitive Security Case Study

Esther Dyson Chair

about us

Reshma Sohoni Board Member

advisory board

Stuart Chapman Board Member

€18 million raised from over 30 high-net-worth individuals

sold to CISCO Systems sold to Brand Embassy

3 Partners + 2 Associates

office in Prague

Credo Ventures - Credostage 1 Fund - /2011/

Key Factors For Building a Global Leader

University Spin-offs In CEE, Opportunities And Challenges

Observations and experiments are performed

Research University develops preliminary commercialization strategy

Market assessment

University may pursue patent protection

Patenting

University proactively approaches companies, entrepreneurs, and investors to bring the technology to market

Prospecting Startup is created and compensation to university may involve fixed fees, milestone fees, royalties, equity, and other forms

The deal

Source: OTC (University of Texas at Austin)

5 Steps of Technology Commercialization

Cognitive Security

a provider of Network Behavior Analysis products and services. It uses advanced Artificial Intelligence techniques to complement current firewalls and Intrusion Detection/Prevention security systems and to protect its users against modern sophisticated network attacks.

Quick pitch:

experts in Network Behavior Analysis

Location:

Prague, Czech Republic

Funding:

EUR 1 million (4/2011)

Exit:

sold to Cisco Systems (2/2013)

COSE Timeline

COMPANY

ESTABLISHED

LICENSE

AGREEMENT

COGNITIVEONE

LAUNCHED

SILICON VALLEY

COGNITIVEONE

2.0

DUE DILIGENCE

START

BUSINESS PLAN

DRAFT

TERM SHEET

SIGNED

VC

INVESTMENT

CISCO OEM

DEAL

VP SALES

HIRED

BULL

DEAL

HEAD OF

SALES HIRED

US NAVY

DEAL

NEW

STRATEGY

BREAK-EVEN

20

EMPLOYESS

TELCO

DEAL

FUNDRAISING

START

TERM SHEET

SIGNED

EQUITY

BUYOUT

EXIT

NEGOTIATIONS

DUE DILIGENCE

START

ACQUIRED

BY CISCO

Investment Case

The business need

- Sales & marketing expansion

- Research & development

- Access to international networks

- Improve corporate governance

Actions to create lasting value

- Active help since the first meeting

- Built a broad and competent ownership structure

- Strengthening of the sales team

- Active board-level work

- Buyout of a passive angel investor

- Support in exit process

Outcomes

- Built the leading IT security company

- The company now employs +30 people

- Expansion to global market that would have taken years organically

- Negotiation with top tier VC

- Sale of Cognitive Security to Cisco Systems after 20 months from the investment

- Large return on investment

Key Factors To Invest

People

Prove it

- strong product/market fit - first revenue - founders‘ dedication - angel funding

Problem

Payment

- security as a service (SME) - $ 2/4/5+ k/year - enterprise and OEM - $ 30/100/250+ k/year

Potential

Polymorphic malware

APT

Zero-day attacks

2009

Intrusion Detection/Prevention market segment

2013

$3.5b $2b

Shareholding Structure Development

40%

60%

Angel investor

Founders

Original, Aug-09

3%

12%

42%

44%

Board members

ESOP

VC investors

Founders

Final, Feb-13

+ earn-out

COSE Team In CISCO

- COSE sales operation taken up by CISCO

- COSE provided as CISCO technology

- Further integration with other CISCO security technology

- COSE will be integrated on the cloud - COSE will support CISCO SIO

COSE Team In CISCO

- International team of 30 young engineers, developers and scientists

- 5 (+5) Phds in Computer Sciencs/Artificial Inteligence

- Martin Rehak – Principal Engineer

- Michal Pechoucek – Director of Enineering

- Based at Charles Square, Prague

Thank You

Vladislav Jež Partner Credo Ventures Křížová 2598/4, Prague 5, 150 00 Czech Republic http://www.credoventures.com email: jez@credoventures.com mob: +420 737 238 278 http://cz.linkedin.com/in/vladojez @CredoVentures