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Quantexa raises $153M to build out AI-based big data tools to track risk and run investigations
As financial crime has become significantly more sophisticated, so too have the tools that are used to combat it. Now, Quantexa — one of the more interesting startups that has been building AI-based solutions to help detect and stop money laundering, fraud and other illicit activity — has raised a growth round of $153 million, both to continue expanding that business in financial services and to bring its tools into a wider context, so to speak: linking up the dots around all customer and other data.
“We’ve diversified outside of financial services and working with government, healthcare, telcos and insurance,” Vishal Marria, its founder and CEO, said in an interview. “That has been substantial. Given the whole journey that the market’s gone through in contextual decision intelligence as part of bigger digital transformation, was inevitable.”
The Series D values the London-based startup between $800 million and $900 million on the heels of Quantexa growing its subscriptions revenues 108% in the last year.
Warburg Pincus led the round, with existing backers Dawn Capital, AlbionVC, Evolution Equity Partners (a specialist cybersecurity VC), HSBC, ABN AMRO Ventures and British Patient Capital also participating. The valuation is a significant hike up for Quantexa, which was valued between $200 million and $300 million in its Series C last July. It has now raised over $240 million to date.
Quantexa got its start out of a gap in the market that Marria identified when he was working as a director at Ernst & Young tasked with helping its clients with money laundering and other fraudulent activity. As he saw it, there were no truly useful systems in the market that efficiently tapped the world of data available to companies — matching up and parsing both their internal information as well as external, publicly available data — to get more meaningful insights into potential fraud, money laundering and other illegal activities quickly and accurately.
Quantexa’s machine learning system approaches that challenge as a classic big data problem — too much data for a human to parse on their own, but small work for AI algorithms processing huge amounts of that data for specific ends.
Its so-called “Contextual Decision Intelligence” models (the name Quantexa is meant to evoke “quantum” and “context”) were built initially specifically to address this for financial services, with AI tools for assessing risk and compliance and identifying financial criminal activity, leveraging relationships that Quantexa has with partners like Accenture, Deloitte, Microsoft and Google to help fill in more data gaps.
The company says its software — and this, not the data, is what is sold to companies to use over their own data sets — has handled up to 60 billion records in a single engagement. It then presents insights in the form of easily digestible graphs and other formats so that users can better understand the relationships between different entities and so on.
Today, financial services companies still make up about 60% of the company’s business, Marria said, with seven of the top 10 U.K. and Australian banks and six of the top 14 financial institutions in North America among its customers. (The list includes its strategic backer HSBC, as well as Standard Chartered Bank and Danske Bank.)
But alongside those — spurred by a huge shift in the market to rely significantly more on wider data sets, to businesses updating their systems in recent years, and the fact that, in the last year, online activity has in many cases become the “only” activity — Quantexa has expanded more significantly into other sectors.
“The Financial crisis [of 2007] was a tipping point in terms of how financial services companies became more proactive, and I’d say that the pandemic has been a turning point around other sectors like healthcare in how to become more proactive,” Marria said. “To do that you need more data and insights.”
So in the last year in particular, Quantexa has expanded to include other verticals facing financial crime, such as healthcare, insurance, government (for example in tax compliance) and telecoms/communications, but in addition to that, it has continued to diversify what it does to cover more use cases, such as building more complete customer profiles that can be used for KYC (know your customer) compliance or to serve them with more tailored products. Working with government, it’s also seeing its software getting applied to other areas of illicit activity, such as tracking and identifying human trafficking.
In all, Quantexa has “thousands” of customers in 70 markets. Quantexa cites figures from IDC that estimate the market for such services — both financial crime and more general KYC services — is worth about $114 billion annually, so there is still a lot more to play for.
“Quantexa’s proprietary technology enables clients to create single views of individuals and entities, visualized through graph network analytics and scaled with the most advanced AI technology,” said Adarsh Sarma, MD and co-head of Europe at Warburg Pincus, in a statement. “This capability has already revolutionized the way KYC, AML and fraud processes are run by some of the world’s largest financial institutions and governments, addressing a significant gap in an increasingly important part of the industry. The company’s impressive growth to date is a reflection of its invaluable value proposition in a massive total available market, as well as its continued expansion across new sectors and geographies.”
Interestingly, Marria admitted to me that the company has been approached by big tech companies and others that work with them as an acquisition target — no real surprises there — but longer term, he would like Quantexa to consider how it continues to grow on its own, with an independent future very much in his distant sights.
“Sure, an acquisition to the likes of a big tech company absolutely could happen, but I am gearing this up for an IPO,” he said.
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A clean energy company now has a market cap rivaling ExxonMobil
The news last week that U.S. utility and renewable energy company NextEra Energy briefly overtook ExxonMobil and Saudi Aramco to become the world’s most valuable energy producer shows just how valuable sustainable businesses have become. It’s yet another proof point that there are billions of dollars available for companies focused on renewable energy alone — and a sign that, finally, the floodgates may be about to open for companies that build their businesses to service a sustainability revolution.
Large money managers are already returning to investing in earlier-stage sustainability investments after an extended hiatus. These are institutional investors like the Canadian Pension Plan Investment Board and Caisse de dépôt et placement du Québec, which could commit billions between them to technologies focused on mitigating the impacts of climate change or reducing greenhouse gas emissions across industries. The flood of dollars into renewable energy and sustainable technologies actually began in the first quarter of the year.
Some of the largest private equity funds in the U.S., like Blackstone (with $571 billion in assets under management), announced a flood of investments into renewable power generation and storage. Blackstone alone invested nearly $1 billion into Altus Power Generation, a renewable energy developer, and NRStor, an energy storage company; while Generate Capital raised $1 billion for renewable energy infrastructure projects; and Warburg Pincus (with more than $50 billion in assets under management) backed Scale Microgrids, which developed clean energy and storage projects, with another $300 million. In March, the Canadian Pension Plan Investment Board closed its investment in Pattern Energy Group, a $6.1 billion transaction that gave the massive money manager ownership of a renewable power project owner and developer with assets across North America and Japan.
Behind all of that massive investment will be a surge in demand for technologies that can orchestrate resources that will be more distributed and provide better energy storage and distribution technologies for a more complicated grid. Indeed, the beginning of the year saw venture firms like Lightspeed Venture Partners, Sequoia and Union Square Ventures begin to plant flags around sustainable investments in startup companies. Microsoft announced a $1 billion climate change-focused investment fund, and in the second quarter, Amazon followed suit with the commitment of $2 billion to its Climate Pledge Fund that would invest across a range of renewable and sustainability-focused technology startups and climate-related projects.
“You’ve got all of this activity even without policy changes — and policy changes are even going in the wrong direction,” said Abe Yokell, a longtime investor in technologies addressing climate change and the managing partner of Congruent Ventures, in an interview with TechCrunch earlier this year. “Our general framework is that the venture model applies to some but not all of the solutions that will solve the problem of climate change.”
Environmental and social investing rises again
In 2007, John Doerr, then one of the world’s most successful venture investors and a leader at Kleiner Perkins Caufield and Byers (now just Kleiner Perkins), delivered an emotional speech to an early audience of TED talk attendees. In it, Doerr announced that KPCB would be investing $200 million into a range of “clean technology” companies and encouraged other investors to make similar commitments. Doerr spoke of a coming climate crisis that would reshape the globe and wreak vast economic damage on communities. He wasn’t wrong.
But the solutions that the first generation of clean tech investors backed were economically unfeasible and markets weren’t then ready to embrace massive investments required to avoid what were, at the time, future risk scenarios. Prices for solar and wind energy production technologies were too expensive and energy storage options too unreliable. Biofuels could not compete at costs that would make them competitive with existing petrochemicals, and bioplastics and chemicals suffered from the same problems (along with a consumer culture that had not awoken to the perils of plastic and chemical production).
While there were a few notable successes from that first generation of clean-tech companies, including, most notably, Tesla, there were far more failures. Kleiner alone poured hundreds of millions into companies like Think and Fisker Automotive, two early electric vehicle companies. Another electric vehicle bet, Better Place, lost $1 billion for investors like VantagePoint Venture Partners. The losses weren’t confined to electric vehicles. Solar energy companies, biofuel companies, grid management companies and battery companies all racked up millions in losses for a generation of venture funds.
Yokell, who previously worked as an investor at Rockport Capital, saw the failures, but managed to persevere and raise new cash with his fund Congruent. “Things are different, but they are different for 10 different reasons — not one different reason,” Yokell said. “The preponderance of dollars went into the physical layer that would drive down the cost of accessing a product or technology. Solar is a great example; wind is a great example; batteries are a great example. [But] this time around, the venture dollars that are going into the ecosystem are being applied to products and services that are going to the end product.”
This means focusing not on the generation of electricity necessarily, but managing and monitoring how those atoms move. Or in the case of food tech, making the processes of creation and distribution more efficient in addition to making new sources of supply. “Venture is a rule of exceptions,” said Yokell. “If you use what works for the venture model and apply it to Tesla [most investors] were wrong. It only takes two massive successes to prove the rule wrong.”
More often though, the money for venture investors is in following some basic rules of investing — chiefly look for high-margin businesses with low upfront capital costs. If something is going to take $40 million or $50 million just to figure out that it might work and then you need to spend another $200 million to prove that it does work … that’s likely not going to be a good bet for a venture firm, Yokell said.
Public markets and large corporations now lead the way
Even as most venture capital dollars shied away from investments in technology that could move the needle on climate (one large exception being Vinod Khosla and Khosla Ventures … another story), the world’s largest investment firms, money managers, publicly traded energy and agriculture companies began stepping up their commitments.
In part, that’s because the economic viability started to become more apparent for decades-old technologies like wind and solar. The costs of these energy-generating technologies made sense to develop because they were, in many cases, cheaper than the alternative. A June report from the International Renewable Energy Agency showed that renewable power generation projects were cheaper than the cost to operate existing coal-fired plants. Next year, the energy agency said, the 1.2 gigawatts of existing coal capacity could cost more to operate than the cost of new utility-scale solar photovoltaics. According to the agency:
Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to USD 23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5% of total global CO2 emissions in 2019. It would also yield an investment stimulus of USD 940 billion, which is equal to around 1% of global GDP.
Beyond that, the real effects of climate change began to be felt in rising insurance payouts as a result of increasingly frequent natural disasters and money managers beginning to realize that you can’t have a functioning economy if you don’t have a functioning society thanks to social unrest brought about by rising populations consuming increasingly limited resources thanks to climatological collapse.
In early January, BlackRock, one of the world’s largest investment firms, pledged to refocus all of its investment activities through a climate lens. The investment bank Jefferies has declared 2020 to be the shot from the starting gun for what will be a decade of investments focused on environmental, social and corporate governance. Big energy companies were already picking up the slack where venture investment left off, with firms like National Grid Partners, Energy Investment Partners and others committing capital to new energy technologies even as venture investors pulled back. In 2016, Bill Gates launched a $1 billion investment fund that would focus on climate-related investing, backed by several of his billionaire buddies (including Kleiner Perkins’ John Doerr and former Kleiner Perkins managing director, Vinod Khosla) and take the big swings that many venture firms were unwilling to take at the time.
Opportunities beyond energy
Investments in clean tech and sustainability were never just about energy, although that captured a fair bit of the imagination and some of the earliest returns — in biofuels companies and electric vehicles. Now, the breadth of the thesis is being expressed in a deluge of exits and millions invested in areas like novel proteins for food production, new technologies for a more sustainable agriculture, new consumer food products, new technologies for managing power and distributing it and fantastic new ways to generate that power.
Last week, AppHarvest, a company using greenhouse farming techniques to grow tomatoes more sustainably, agreed to go public through a special purpose acquisition vehicle, and just today, a bioplastics manufacturer is taking the same tack. With the world awash in capital and looking for high-growth companies to generate returns, sustainability looks like a good bet.
Those are the companies that have managed to access public markets in the last week. Beyond Meat captured the attention of institutional investors and the investing public with its better-tasting hamburger substitute, and Perfect Day snagged a massive investment from the Canadian Pension Plan Investment Board to make an alternative to cow’s milk. In fact, Perfect Day was the inaugural investment in the national pension fund’s climate strategy. Other deals should follow.
Meanwhile, as carbon emissions monitoring, management and sequestration gain broader commercial and consumer traction, other investment opportunities will begin to open up for digital solutions.
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Investors give Baltimore’s Facet Wealth $25 million to sell businesses on financial planning as a benefit
Yesterday, Baltimore-based fintech company Facet Wealth said it raised $25 million in financing as it readies a new business line pitching financial planning as an employment benefit to businesses looking to recruit top talent.
Employment benefit packages are expanding beyond the basic gym membership and healthcare to include subscriptions to Netflix, discounts on delivery and rideshare services, and other perks. So why not financial wellness?
The thesis certainly managed to attract a big-money backer, with Warburg Pincus, the multi-billion-dollar private equity investment firm, which doubled down on its commitment with the new financing into the company.
The company said the latest round would be used to finance the expansion of Facet Wealth’s direct-to-consumer business even as it readies its employee benefit service for launch.
Already customers are signing up for pre-launch partnerships to get their employees on the program. Early wannabe users include ClassPass, MyVest and Chili Piper, the company said.
“Since our first investment two years ago, the Facet Wealth team has proven their ability to meet a unique consumer need, evolving and expanding their offering to build a truly innovative client experience and business model,” said Jeff Stein, managing director at Warburg Pincus. “Their expansion into the employer market further solidifies them as a category-defining company that is well-positioned to disrupt the wealth management industry for years to come.”
To date, Facet Wealth has raised $62 million in funding from Warburg Pincus, Slow Ventures and other, undisclosed investors.
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BetterCloud scores $75M Series F as SaaS management needs grow
BetterCloud gives IT visibility into its SaaS tools providing the means to discover, manage and secure those tools. In the middle of a crisis that has forced most companies to move workers home, being able to manage SaaS usage in this way is growing increasingly significant.
Today the company announced a $75 million Series F. Warburg Pincus led the way with participation from existing investors Bain Capital Ventures, Accel, Greycroft Partners, Flybridge Capital Partners, New Amsterdam Growth Capital and e.ventures. Today’s round brings the total raised to $187 million, according to the company.
While CEO David Politis acknowledges the gravity of the current situation, he also recognizes that giving companies a way to manage their SaaS usage is more pertinent than ever. “What has happened in the last two months has been terrible for the world, but in some crazy way it has just made what we do a lot more relevant,” Politis told TechCrunch .
He says the pandemic has really accelerated the market opportunity because of the reliance on cloud services and the services his company provides.
Those services began as an operational layer on top of G Suite. Later it added support for Office 365 and in 2016 it moved to more general SaaS management. It now offers direct integrations into multiple SaaS apps including Box, Dropbox, Salesforce, Zendesk and more. The set of tools in Bettercloud gives IT control over security, configuration, spend optimization and auditability across SaaS applications.
In normal times after a large Series F round, we might be talking about this being the last round before an IPO, but Politis isn’t ready to commit to that just yet, especially in this economy. He does say, however, that he’s in it for the long haul and sees an opportunity to build a long-term, sustainable company.
“The last couple of months I’ve been thinking about this a lot, and when you take a $75 million round at the stage you’re not doing that because you want to sell the business. You’re doing that because you want to build something and build something really special,” he said.
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Sustainable microgrids are the future of clean energy
Alex is a research analyst and blogger focused on future technologies in transportation, energy, automation, and decentralization. He has experience in data and operations at Fortune 500 companies and tech startups and has been a regular contributor at Seeking Alpha, Spend Matters, Metal Miner, and other publications.
Across the U.S., sustainable microgrids are emerging as a vital tool in the fight against climate change and increasingly common natural disasters. In the wake of hurricanes, earthquakes and wildfires, the traditional energy grid in many parts of the country is struggling to keep the power flowing, causing outages that slow local economies and ultimately put lives at risk.
Microgrids — power installations that are designed to run independently from the wider electricity grid in emergency situations — have been around for decades, but until the turn of the century, relied almost exclusively on fossil fuels to generate power. While it’s taken another 20 years for solar panels and battery storage costs to fall far enough to make truly sustainable microgrids an economic reality, a recent surge in interest and installations have shown that they’ve reached an inflection point and could very well be the future of clean energy.
Take Santa Barbara, where the Unified School District voted unanimously in November to allocate over $500,000 to study and design microgrid installations for schools around the county. A preliminary assessment by the Clean Coalition identified more than 15 megawatts of solar generation potential across 18 school sites.
These solar-plus-battery-storage microgrids would greatly enhance the ability of chosen schools to serve communities during natural disasters or power outages, like the ones induced by California’s PG&E electric utility that affected hundreds of thousands of residents last October. The sites will provide a place to coordinate essential emergency services, store perishable food and provide residents with light, power and connectivity in times of distress.
A completed feasibility study for the microgrid installations is expected in June, and while initial estimates put the final cost around $40 million, long-term power purchase agreements (PPAs) will allow the school district to have the sites set up for free and paid for over time via its normal electric bill — at a cost no greater than grid power. Agreements like these have only become economically viable in the last few years as renewable energy generation costs have continued to fall, and are a major driver of the microgrid boom.
At the end of January, Scale Microgrid Solutions received a commitment for $300 million in funding from investment firm Warburg Pincus. Microgrids today are typically designed and installed to the unique specifications of individual customers. Scale Microgrid Solutions instead provides modular microgrid infrastructure built using shipping containers that combine solar and battery storage with control equipment and backup gas generation.
These modules enable faster deployment and provide a viable option for customers or institutions seeking microgrid capabilities in the $15 million price range. The first modular microgrids were launched in May 2019 with financing provided by Generate Capital, a financing firm focused on advanced, clean-energy technology investments.
Meanwhile, on the opposite side of the country, successive disasters are already proving the value of solar-plus-storage microgrids in Puerto Rico. In 2017, Hurricane Maria catastrophically damaged the centralized electricity grid in the U.S. territory and left many without power for more than a year.
A project funded by the Rocky Mountain Institute, Save the Children and Kinesis Foundation installed solar-plus-battery-storage microgrids at 10 schools in the mountainous central regions of the island, designed to provide energy for on-site libraries, kitchens and water pumps indefinitely during power outages. The installations were completed in December 2019, just weeks before a series of earthquakes that began in January endangered the island’s already sluggish economic recovery. The RMI Island Energy Program told Microgrid Knowledge that while grid power around several of the sites had gone down, the microgrids had continued to operate successfully and provide critical services.
Microgrids go beyond schools though. Several communities are also linking solar-and-storage systems mounted on their homes, employing inverters and controllers that have only become efficient and affordable in the last few years to create “community microgrids” that share power among the participants to supplement or replace grid energy.
In January, Australian startup Relectrify closed $4.5 million in Series A funding to continue refining their inverter and battery-management technology that increases battery lifespan by as much as 30% while reducing operational costs. Relectrify tech also allows large batteries from electric cars — including Tesla’s wildly popular offerings — to be repurposed after they are no longer reliable enough for use in EVs, opening up an enormous pool of second-hand batteries to be repurposed for growing microgrid storage demand.
Programs like these are attractive not just because they offer resilience and independence from grid power often produced with fossil fuels, but because they are increasingly the cheaper option for energy consumers. Residential retail energy prices in Puerto Rico were as high as 27 cents per kilowatt hour (kWh) in 2019, while the calculated cost from home solar-plus-battery-storage systems fell as low as 24 cents in good conditions.
The cost of solar installations has plummeted 90% in the past decade according to the research firm Wood Mackenzie. At the same time, the early effects of a warming climate and associated natural disasters have started to take a toll on American energy infrastructure already struggling to keep pace with regular maintenance and demand growth. Impacted communities have already seen the value of microgrids and are racing to adopt them, even as many larger utility providers look to natural gas or other partial solutions that rely on the aging centralized power grid.
The greatest impact of these early sustainable microgrids may reach beyond the emergency power they provide to nearby residents. They offer a glimpse of a radically different way for communities and energy consumers to think about how power is produced and used. In community microgrid systems, residents have a concrete, practical connection to their source of energy and are asked to work together with their friends and neighbors to control their energy demand so there is enough to go around.
Such a system stands in stark contrast to the power grid of today, where peak demand facilities are routinely called upon to burn some of the most environmentally harmful fuels to accommodate demand with few if any social or technological limitations. Sustainable microgrids are finally becoming truly affordable, and in the process are beginning to change the way we think about energy consumption and resilience.
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China startup deals shrink as fundraising for investors plummets
Chinese startups continue to weather tough times as private investors, caught in a cash crunch, are concentrating money into fewer deals.
China’s deal-making activity for startups in the six months ended June halved from a year ago to 1,910, according to data from consulting firm ChinaVenture’s research arm. The amount invested in domestic startups during the first half of 2019 plummeted 54% to $23.2 billion.
The slide in startup investment comes as the money behind the money shrinks amid a cooling economy in China that is exacerbated by a trade war with the U.S. Fundraising for investors was already showing signs of slowdown a year earlier. In the first half of this year, private equity and venture capital firms in China secured 30% less than what they had raised over the same period a year ago, amounting to a total of $54.44 billion; 271 funds managed to raise, down 52%.
That money from limited partners is also flowing to a small rank of investors. Twelve institutions accounted for 57% of all the capital landed by VCs and PEs in the period. Investment coffers that have gotten a big boost include the likes of TPG Capital, Warburg Pincus, DCG Capital, Legend Capital and Source Code Capital.
Healthcare was the most-backed sector during the six months, although proptech startups scored the biggest average deal size. Some of the highest funded companies from the period were artificial intelligence chip maker Horizon Robotics, shared housing upstart Danke and China’s Starbucks challenger, Luckin.
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Social CRM Provider Capillary Technologies Raises $45M, Acquires MartJack
Capillary Technologies, the Singapore-based social CRM company, has raised a $45 million Series C to fuel its evolution into an omnichannel retail platform. The round was led by Warburg Pincus with participation from returning investors Sequoia Capital and Norwest Venture Partners and brings Capillary’s total funding so far to $79.1 million. Read More
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