risk management
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Charity Dean has been in the national spotlight lately because she was among a group of doctors, scientists and tech entrepreneurs who sounded the pandemic alarm early last year and who are featured in a new book by Michael Lewis about the U.S. response, called The Premonition.
It’s no wonder the press — and, seemingly moviemakers, too — are interested in Dean. Surgery is her first love, but she also studied tropical diseases and not only applied what she knows about outbreaks on the front lines last year, but also came to appreciate an opportunity that only someone in her position could see. Indeed, after the pandemic laid bare just how few tools were available to help the U.S. government to track how the virus was moving and mutating, she helped develop a model that has since been turned into subscription software to (hopefully) prevent, detect, and contain costly disease outbreaks in the future.
It’s tech that companies with global operations might want to understand better. It has also attracted $8 million in seed funding Venrock, Alphabet’s Verily unit, and Sweat Equity Ventures. We talked late last week with Dean about her now 20-person outfit, called The Public Health Company, and why she thinks disease-focused risk management will be as crucial for companies going forward as cybersecurity software. Our chat has been edited for length; you can also listen to our longer conversation here.
TC: You went to medical school but you also have a master’s degree in public health and tropical medicine. Why was the latter an area of interest for you?
CD: Neither of my parents had college degrees. I grew up in a very modest setting in rural Oregon. We were poor and by the grace of a full ride scholarship to college I got to be premed. When I was a little girl some missionaries came to our church and talked about disease outbreaks in Africa. I was seven years old, and driving home that evening with my parents, I said, ‘I’m going to be a doctor, and I’m going to study disease.’ It was outrageous because I didn’t know a single person with a college degree. But . . my heart was set on that, and it never deviated from it.
TC: How did you wind up at the Santa Barbara County Public Health Department, instead of in private practice?
CD: It’s funny, when I was finishing up my residency — which I started doing general surgery, then I pivoted into internal medicine — I had a number of different doctors’ private practices come to me and try to recruit me because of the shortage of women physicians.
[At the same time] the medical director from the county public health department came and found me and he said, ‘Hey, I hear you have a master’s in tropical medicine.’ And he said, ‘Would you consider coming to work as the deputy health officer, and communicable disease controller, and tuberculosis controller, and [oversee the] HIV clinic and homeless clinic?’ And . . . it was, for me, a fairly easy choice.
TC: Because there was so little attention being paid to all of these other issues?
CD: What caught my attention is when he said communicable disease controller and tuberculosis controller. I had lived in Africa [for a time] and learned a lot about HIV, AIDS, tuberculosis, vaccine-preventable diseases — things you don’t see in the United States. [And the job] was so in lockstep with who I was because it’s the safety net. [These afflicted individuals] don’t have health insurance. Many are undocumented. Many have nowhere else to go for health care, and the county clinic truly serves the communities that I cared about, and that’s where I wanted to be.
TC: In that role — and later at the California Department of Public Health — you developed expertise in multi-drug-resistant tuberculosis. Was your understanding of how it is transmitted — and how the symptoms present differently — what made you attuned to what was headed for the U.S. early last year?
CD: It was probably the single biggest contributor to my thinking. When we have a novel pathogen as a doctor, or as a communicable disease controller, our minds think in terms of buckets of pathogen: some are airborne, some are spread on surfaces, some are spread through fecal material or through water. In January [of last year], as I was watching the news reports emerge out of China, it became clear to me that this was potentially a perfect pathogen. What does that mean? It would mean it had some of the attributes of things like tuberculosis or measles or influenza — that it had the ability to spread from person to person, likely through the air, that it made people sick enough that China was standing up hospitals in two weeks, and that it moved fast enough through the population to grow exponentially.
TC: You are credited with helping to convince California Governor Gavin Newsom to issue lock-down orders when he did.
CD: Everything I’ve done is as part of a team. In March, some amazing heroes parachuted in from the private sector, including [former U.S Chief Technology Officer] Todd Park, [famed data scientist] DJ Patil, [and Venrock’s] Bob Kocher, to help the state of California develop a modeling effort that would actually show, through computer-generated models, in what direction the pandemic was headed.
TC: How did those efforts and thinking lead you to form The Public Health Company last August?
CD: What we are doing at The Public Health Company is incorporating the genomic variant analysis — or the fingerprint of the virus of COVID virus as it mutates and as it moves through a population — with epidemiology investigations and [porting these with] the kind of traditional data you might have from a local public health officer into a platform to make those tools readily available and easy to use to inform decision makers. You don’t have to have a mathematician and a data scientist and an infectious disease doctor standing next to you to make a decision; we make those tools automated and readily available.
TC: Who are your customers? The U.S. government? Foreign governments?
CD: Are the tools that we are developing useful for government? Absolutely. We’re engaged in a number of different partnerships where this is of incredible service to governments. But they are as useful, if not even more useful, to the private sector because they haven’t had these tools. They don’t have a disease control capability at their fingertips and many of them have had to essentially stand up their own internal public health department, and figure it out on the fly, and the feedback that we’re seeing from private sector businesses has been incredible.
TC: I could see hedge funds and insurance companies gravitating quickly to this. What are some customers or types of customers that might surprise readers?
CD: One bucket that might not occur to people is in the risk management space of a large enterprise that has global operations like a warehouse or a factory in different places. The risk management of COVID-19 is going to look very different in each one of those locations based on: how the virus is mutating in that location, the demographics of their employees, the type of activities they’re doing, [and] the ventilation system in their facility. Trying to grapple with all of those different factors . . .is something that we can do for them through a combination of our tech-enabled service, the expertise we have, the modeling, and the genetic analysis.
I don’t know that risk management in terms of disease control has been a big part of private sector conversations, [but] we think of it similar to cyber security in that after a number of high-profile cyber security attacks, it became clear to every insurance agency or private sector business that risk management had to include cyber security they had to stand up. We very much believe that disease control in risk management for continuity of operations is going to be incredibly important moving forward in a way that I couldn’t have explained before COVID. They see it now and they understand it’s an existential threat.
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Typically when we talk about tech and security, the mind naturally jumps to cybersecurity. But equally important, especially for global companies with large, multinational organizations, is physical security — a key function at most medium-to-large enterprises, and yet one that to date, hasn’t really done much to take advantage of recent advances in technology. Enter Base Operations, a startup founded by risk management professional Cory Siskind in 2018. Base Operations just closed their $2.2 million seed funding round and will use the money to capitalize on its recent launch of a street-level threat mapping platform for use in supporting enterprise security operations.
The funding, led by Good Growth Capital and including investors like Magma Partners, First In Capital, Gaingels and First Round Capital founder Howard Morgan, will be used primarily for hiring, as Base Operations looks to continue its team growth after doubling its employe base this past month. It’ll also be put to use extending and improving the company’s product and growing the startup’s global footprint. I talked to Siskind about her company’s plans on the heels of this round, as well as the wider opportunity and how her company is serving the market in a novel way.
“What we do at Base Operations is help companies keep their people in operation secure with ‘Micro Intelligence,’ which is street-level threat assessments that facilitate a variety of routine security tasks in the travel security, real estate and supply chain security buckets,” Siskind explained. “Anything that the chief security officer would be in charge of, but not cyber — so anything that intersects with the physical world.”
Siskind has firsthand experience about the complexity and challenges that enter into enterprise security since she began her career working for global strategic risk consultancy firm Control Risks in Mexico City. Because of her time in the industry, she’s keenly aware of just how far physical and political security operations lag behind their cybersecurity counterparts. It’s an often overlooked aspect of corporate risk management, particularly since in the past it’s been something that most employees at North American companies only ever encounter periodically when their roles involve frequent travel. The events of the past couple of years have changed that, however.
“This was the last bastion of a company that hadn’t been optimized by a SaaS platform, basically, so there was some resistance and some allegiance to legacy players,” Siskind told me. “However, the events of 2020 sort of turned everything on its head, and companies realized that the security department, and what happens in the physical world, is not just about compliance — it’s actually a strategic advantage to invest in those sort of services, because it helps you maintain business continuity.”
The COVID-19 pandemic, increased frequency and severity of natural disasters, and global political unrest all had significant impact on businesses worldwide in 2020, and Siskind says that this has proven a watershed moment in how enterprises consider physical security in their overall risk profile and strategic planning cycles.
“[Companies] have just realized that if you don’t invest [in] how to keep your operations running smoothly in the face of rising catastrophic events, you’re never going to achieve the profits that you need, because it’s too choppy, and you have all sorts of problems,” she said.
Base Operations addresses this problem by taking available data from a range of sources and pulling it together to inform threat profiles. Their technology is all about making sense of the myriad stream of information we encounter daily — taking the wash of news that we sometimes associate with “doom-scrolling” on social media, for instance, and combining it with other sources using machine learning to extrapolate actionable insights.
Those sources of information include “government statistics, social media, local news, data from partnerships, like NGOs and universities,” Siskind said. That data set powers their Micro Intelligence platform, and while the startup’s focus today is on helping enterprises keep people safe, while maintaining their operations, you can easily see how the same information could power everything from planning future geographical expansion, to tailoring product development to address specific markets.
Siskind saw there was a need for this kind of approach to an aspect of business that’s essential, but that has been relatively slow to adopt new technologies. From her vantage point two years ago, however, she couldn’t have anticipated just how urgent the need for better, more scalable enterprise security solutions would arise, and Base Operations now seems perfectly positioned to help with that need.
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European Union Member States have published a joint risk assessment report into 5G technology which highlights increased security risks that will require a new approach to securing telecoms infrastructure.
The EU has so far resisted pressure from the U.S. to boycott Chinese tech giant Huawei as a 5G supplier on national security grounds, with individual Member States such as the UK also taking their time to chew over the issue.
But the report flags risks to 5G from what it couches as “non-EU state or state-backed actors” — which can be read as diplomatic code for Huawei. Though, as some industry watchers have been quick to point out, the label could be applied rather closer to home in the near future, should Brexit comes to pass…
Some parts of the 5G report on risk of non-EU cyberattacks may accidentally gain a new unexpected meaning after #Brexit (https://t.co/o7gyV0hqCv) https://t.co/VgU30kRz4p
— Lukasz Olejnik (@lukOlejnik) October 9, 2019
Back in March, as European telecom industry concern swirled about how to respond to US pressure to block Huawei, the Commission stepped in to issue a series of recommendations — urging Member States to step up individual and collective attention to mitigate potential security risks as they roll out 5G networks.
Today’s risk assessment report follows on from that.
It identifies a number of “security challenges” that the report suggests are “likely to appear or become more prominent in 5G networks” vs current mobile networks — linked to the expanded use of software to run 5G networks; and software and apps that will be enabled by and run on the next-gen networks.
The role of suppliers in building and operating 5G networks is also noted as a security challenge, with the report warning of a “degree of dependency on individual suppliers”, and also of too many eggs being placed in the basket of a single 5G supplier.
Summing up the effects expected to follow 5G rollouts, per the report, it predicts:
The high level report is a compilation of Member States’ national risk assessments, working with the Commission and the European Agency for Cybersecurity. It’s couched as just a first step in developing a European response to securing 5G networks.
“It highlights the elements that are of particular strategic relevance for the EU,” the report says in self-summary. “As such, it does not aim at presenting an exhaustive analysis of all relevant aspects or types of individual cybersecurity risks related to 5G networks.”
The next step will be the development, by December 31, of a toolbox of mitigating measures, agreed by the Network and Information Systems Cooperation Group, which will be aimed at addressing identified risks at national and Union level.
“By 1 October 2020, Member States – in cooperation with the Commission – should assess the effects of the Recommendation in order to determine whether there is a need for further action. This assessment should take into account the outcome of the coordinated European risk assessment and of the effectiveness of the measures,” the Commission adds.
For the toolbox a variety of measures are likely to be considered, per the report — consisting of existing security requirements for previous generations of mobile networks with “contingency approaches” that have been defined through standardisation by the mobile telephony standards body, 3GPP, especially for core and access levels of 5G networks.
But it also warns that “fundamental differences in how 5G operates also means that the current security measures as deployed on 4G networks might not be wholly effective or sufficiently comprehensive to mitigate the identified security risks”, adding that: “Furthermore, the nature and characteristics of some of these risks makes it necessary to determine if they may be addressed through technical measures alone.
“The assessment of these measures will be undertaken in the subsequent phase of the implementation of the Commission Recommendation. This will lead to the identification of a toolbox of appropriate, effective and proportionate possible risk management measures to mitigate cybersecurity risks identified by Member States within this process.”
The report concludes with a final line saying that “consideration should also be given to the development of the European industrial capacity in terms of software development, equipment manufacturing, laboratory testing, conformity evaluation, etc” — packing an awful lot into a single sentence.
The implication is that the business of 5G security will need to get commensurately large to scale to meet the multi-dimensional security challenge that goes hand in glove with the next-gen tech. Just banning a single supplier isn’t going to cut it.
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Entering into the world of Anthemis is a bit like stepping into the frame of a Wes Anderson film. Eclectic, offbeat people situated in colorful interiors? Check. A muse in the form of a renowned British-Venezuelan economist? Check. A design-forward media platform to provoke deep thought? Check. An annual summer retreat ensconced in the French Alps? Bien sûr.
Sitting atop this most unusual fintech(ish) VC is its ponytailed founder and chairman Sean Park, whose difficult-to-place accent and Philosophy professor aura belie his extensive fixed income capital markets experience. He’s joined by founder and CEO Amy Nauiokas, who in addition to being one of Fintech’s most prominent female investors also owns a high-minded film and television production company.
When Arman Tabatabai and I recently sat down with Park and Nauiokas in their New York office, the firm’s leaders were in an upbeat mood, having blown past the temporary perception-setback associated with the abrupt resignation last year of Anthemis’ former CEO Nadeem Shaikh (for more on this, read TechCrunch writer Steve O’Hear’s coverage of the situation).
And as the conversation below demonstrates, Park and Nauiokas are well poised to bring the quirk into everything they touch, which these days runs the gamut from backing companies involved in sustainable finance, advancing their home-grown media platform and preparing a soon-to-be-announced initiative elevating female entrepreneurs.
Gregg Schoenberg: With the two of you now at the helm, how does Anthemis present itself today?
Sean Park: I’ll step back and say that when Amy and I were working at big financial institutions in the noughties, we saw that the industry was going to change and that existing business models were running into their natural diminishing returns.
We tried to bring some new ideas to the organizations we were working in, but we each had epiphany moments when we realized that big organizations weren’t built to do disruptive transformation — for bad reasons, but also good reasons, too.
GS: Let’s fast forward to today, where you have several strong Fintech VCs out there. But unlike others, Anthemis puts weirdness at the heart of its model.
Yes, you’ve backed some big names like Betterment and eToro, but you’ve done other things that are farther afield. What’s the underlying thesis that supports that?
Amy Nauiokas: Whatever we do at Anthemis has to be a non-zero-sum game. It has to be for good, not for evil. So that means that we aren’t looking in any place where you see predatory opportunities to make money.
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The Valley’s rocky history with cleantech investing has been well-documented.
Startups focused on non-emitting-generation resources were once lauded as the next big cash cow, but the sector’s hype quickly got away from reality.
Complex underlying science, severe capital intensity, slow-moving customers and high-cost business models outside the comfort zones of typical venture capital ultimately caused a swath of venture-backed companies and investors in the cleantech boom to fall flat.
Yet, decarbonization and sustainability are issues that only seem to grow more dire and more galvanizing for founders and investors by the day, and more company builders are searching for new ways to promote environmental resilience.
While funding for cleantech startups can be hard to find nowadays, over time we’ve seen cleantech startups shift down the stack away from hardware-focused generation plays toward vertical-focused downstream software.
A far cry from past waves of venture-backed energy startups, the downstream cleantech companies offered more familiar technology with more familiar business models, geared toward more recognizable verticals and end users. Now, investors from less traditional cleantech backgrounds are coming out of the woodwork to take a swing at the energy space.
An emerging group of non-traditional investors getting involved in the clean energy space are those traditionally focused on fintech, such as New York and Europe-based venture firm Anthemis — a financial services-focused team that recently sat down with our fintech contributor Gregg Schoenberg and I (check out the full meat of the conversation on Extra Crunch).
The tie between cleantech startups and fintech investors may seem tenuous at first thought. However, financial services have long played a significant role in the energy sector and is now becoming a more common end customer for energy startups focused on operations, management and analytics platforms, thus creating real opportunity for fintech investors to offer differentiated value.
Though the conversation around energy resources and decarbonization often focuses on politics, a significant portion of decisions made in the energy generation business is driven by pure economics — is it cheaper to run X resource relative to resources Y and Z at a given point in time? Based on bid prices for request for proposals (RFPs) in a specific market and the cost-competitiveness of certain resources, will a developer be able to hit their targeted rate of return if they build, buy or operate a certain type of generation asset?
Alternative generation sources like wind, solid oxide fuel cells or large-scale or even rooftop solar have reached more competitive cost levels — in many parts of the U.S., wind and solar are in fact often the cheapest form of generation for power providers to run.
Thus as renewable resources have grown more cost competitive, more infrastructure developers and other new entrants have been emptying their wallets to buy up or build renewable assets like large-scale solar or wind farms, with the American Council on Renewable Energy even forecasting cumulative private investment in renewable energy possibly reaching up to $1 trillion in the U.S. by 2030.
A major and swelling set of renewable energy sources are now led by financial types looking for tools and platforms to better understand the operating and financial performance of their assets, in order to better maximize their return profile in an increasingly competitive marketplace.
Therefore, fintech-focused venture firms with financial service pedigrees, like Anthemis, now find themselves in pole position when it comes to understanding cleantech startup customers, how they make purchase decisions, and what they’re looking for in a product.
In certain cases, fintech firms can even offer significant insight into shaping the efficacy of a product offering. For example, Anthemis portfolio company kWh Analytics provides a risk management and analytics platform for solar investors and operators that helps break down production, financial analysis and portfolio performance.
For platforms like kWh analytics, fintech-focused firms can better understand the value proposition offered and help platforms understand how their technology can mechanically influence rates of return or otherwise.
The financial service customers for clean energy-related platforms extends past just private equity firms. Platforms have been and are being built around energy trading, renewable energy financing (think financing for rooftop solar) or the surrounding insurance market for assets.
When speaking with several of Anthemis’ cleantech portfolio companies, founders emphasized the value of having a fintech investor on board that not only knows the customer in these cases, but that also has a deep understanding of the broader financial ecosystem that surrounds energy assets.
Founders and firms seem to be realizing that various arms of financial services are playing growing roles when it comes to the development and access to clean energy resources.
By offering platforms and surrounding infrastructure that can improve the ease of operations for the growing number of finance-driven operators or can improve the actual financial performance of energy resources, companies can influence the fight for environmental sustainability by accelerating the development and adoption of cleaner resources.
Ultimately, a massive number of energy decisions are made by financial services firms and fintech firms may often know the customers and products of downstream cleantech startups more than most. And while the financial services sector has often been labeled as dirty by some, the vital role it can play in the future of sustainable energy offers the industry a real chance to clean up its image.
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Berlin based Internet of Things (IoT) startup relayr, whose middleware platform is geared towards helping industrial companies unlock data insights from their existing machinery and production line kit by linking Internet connected sensors and edge devices to platform controls, has been acquired by insurance group Munich Re in a deal which values the company at $300 million.
relayr was founded back in 2013 with the initial aim of helping software developers hack around with hardware, at a time when developer interest in IoT was just taking off.
The startup went on to pass through startupbootcamp and crowdfunded a cute looking chocolate-bar shaped hardware starter kit before expanding into building a hardware agnostic cloud services platform to act as a central hub for data flows. relayr then further honed its focus to the needs of industrial IoT, and its platform — which is now used by around 130 businesses — offers end-to-end middleware combined with device management and IoT analytics, and can operate in the cloud, on-premise or a hybrid of both depending on customers needs.
We first covered the Berlin-based startup back in 2014 when it closed a $2.3M seed round. It’s raised $66.8M in total, according to Crunchbase, which includes a $30M Series C round in February led by Deutsche Telekom Capital Partners.
relayr did not disclose the investors in its 2014 seed at the time, saying only that they were unnamed U.S. and Switzerland-based investors. But Kleiner Perkins and Munich Re (via its HSB subsidiary which is acquiring relayr now) were named as investors in later rounds, along with Deutsche Telekom .
Insurance giants and telcos have a clear strategic interest in IoT — with the technology promising to drive network usage and utility on the telco side, and offering transformative potential for the insurance industry as data streams can be used to monitor equipment performance and predict (and even steer off) costly failures.
Munich Re said today that its HSB subsidiary is acquiring 100% of relayr in a deal that values the business at $300M. (It’s not clear if it’s all cash or a mix of cash and stock — we’ve asked. Update: A spokeswomen for Munich Re confirmed the transaction will be financed with “internal cash funds” from the group).
It says the deal will help it “shape opportunities in the fast-growing IoT market”, and is envisaging a joint business model with the combined pair developing not just tech solutions for clients but risk management, data analysis and financial instruments.
“IoT is already significantly changing our world and has the potential to disrupt the traditional insurance and reinsurance industry through new business models, services and competitors,” said Torsten Jeworrek, member of Munich Re’s board of management in a statement. “I am truly happy to announce this acquisition, as it supports our strategy to combine our knowledge of risk, data analysis skills and financial strength with the technological expertise of relayr. This is our basis to develop new ideas for tomorrow’s commercial and industrial worlds.”
“We are delighted to strengthen our relationship with Munich Re/HSB to push digitalization in commercial and industrial markets and strive for our mission to help commercial and industrial businesses stay relevant,” added relayr CEO, Josef Brunner. “The unique combination of the companies demonstrates the importance to deliver business outcomes to customers and the need to combine first-class technology and its delivery with powerful financial and insurance offerings. This transaction is a great opportunity to build a global category leader.”
The pair have been partnered since 2016, when the insurance firm invested in relayr’s Series B, but say they see the acquisition strengthening Munich Re’s financial and insurance offerings while also offering a route to expand relayr’s middleware business via leveraging the insurance group’s large client base.
“Back in 2016, HSB invested in relayr in an effort to harness the strategically significant business potential offered by IoT. relayr’s end-to-end IoT solutions for the industrial and commercial sectors are an ideal addition to our Group’s capabilities,” said Greg Barats, president and CEO of HSB, and the person responsible for Munich Re’s IoT strategy, in another supporting statement. “HSB has always focused on insurance and technology… relayr will help us to rapidly implement our global strategy to develop new IoT solutions for our clients. Digital transformation in the industrial and commercial sectors offers opportunities for new services and financial applications.”
relayr says it already offers industrial companies which are seeking to digitalise their businesses a “comprehensive range of services” — such as being able to extract and analyse data from machines and equipment to determine when a machine is likely to fail (and it touts cutting costs, increased energy efficiency and product quality improvement as among the benefits its platform offers) — but says the acquisition will allow it to develop its “innovative value stack”, by enabling new revenue models, cost reduction, and “increased effectiveness across industries”.
It also sees benefit in sitting under the established Munich Re umbrella — as a way to convince customers it will be a long-term business partner. It adds that it will continue to maintain its current focus on IoT for the industrial sector.
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