Travis [00:00:10] All right, everybody, welcome to this month’s investing in identity form. I am your host today, Travis Jarae, the founder CEO of Liminal. For those that aren’t super familiar with us, we are a boutique strategy firm focused squarely on the digital identity, fintech and cybersecurity space, typically focused on solving either growth strategy or go to market problems for businesses between kind of that series. See through public companies so many private equity venture backed businesses in the space. What we do here, like I mentioned, we do advisory services, but we also do research and other industry engagement items. So if you want to talk to us about anything related to identity fintech, cybersecurity, please do reach out to us. We love to nerd out with other folks interested in this topic. So great. Jumping right into it got the typical cast and crew here. Like I mentioned, my name is Travis Jarae. We’re joined by Cameron D’Ambrosio, managing director, as well as Dave Field’s partner at PTB Ventures. What’s going on, guys?

David [00:01:16] Glad to be back.

Travis [00:01:19] Springtime, it’s springtime, but yeah, yeah, we didn’t have a session in February, so, you know, we released that big reusable identity report and got, I think, a little bogged down. Well, hi, how are you feeling about the spring days?

David [00:01:35] You know, it’s an interesting. Well, you know, usually springtime is hopeful, right? Although the world does not give us very many reasons for that these days. Markets turned around a little bit in the last week or so. It’ll be interesting to find out if that’s the proverbial dead cat bounce or or, you know, actual return to kind of where we were a year ago. I know we’re going to get into a couple of the deals here pretty soon, but it’s certainly an interesting time for identity companies and M&A as we’re going to see, given some of the dynamics around, valuations are now down. Broadly speaking, anywhere from 25 to 50 percent, some software companies are down even more than that. And you have big cash piles at some of the larger tech companies or some of the more mature tech companies. So it certainly makes for some interesting market dynamics.

Travis [00:02:33] Yeah. There’s nothing like coming out of winter into a very interesting market. I mean, you know, we talk about this a lot and, you know, as a business that liminal, we get to do a lot of commercial due diligence and growth strategies where we’re thinking about that build by partner decision. A lot of that’s rooted in the capital markets. And you know, if you’re listening to this and you’re saying, I hope these guys have all the answers, we’re going to have to apologize because, you know, it is a very confusing time and you know, hopefully will make some sense to some of these deals here. But I think we’re all a bit of a passenger right now on on this, on this train. So with that, let’s go ahead and introduce some of the notable deals. So we had actually a whole bunch lined up to talk about today. But we’re recording this here on March 25th. So a couple of big deals this week that really, I think, shaped this conversation today, the first one being my tech and who you about $130 million cash deal for my tech buying who you, which is the UK firm? Very, very interesting. My tech’s market cap yesterday morning was around six six hundred thirty million and I think ended around six forty five six 650, so the market probably didn’t really know how to react to it. This particular deal and very expensive deal, and we’re going to talk about that here in a minute. The second big deal at one time, it was a vast acquiring security, you know, vast part of that largest cyber security deal ever with NortonLifeLock, a little bit stalled with the the UK regulators. And but we expect that to probably continue to go forward. But Avast continued to march down field making acquisitions in the space. You know, since they brought on Charlie Walton, formerly the CEO of security and general manager of the MasterCard identity program. So this acquisition very, very interesting, pretty telling for for what Avast is trying to accomplish with this one on the heels of of Evernym. So we’ll dig into that one here momentarily and then Google and Mandiant. So when that didn’t happen this week, but one that’s definitely worth worth calling out. And Dave, you want to kick it back over to you. Obviously, you’re talking about large cash balance sheets. Interesting market dynamics right now. What are your thoughts on what your thoughts on this deal?

David [00:05:12] Yeah. Well, I mean, look, mandeans an interesting company, right? It was, you know, Mandiant was a consulting and services business. I think it was bought over a decade ago by a company which was called fire. I know FireEye subsequently had a data breach, and it’s gone through a couple of different iterations. I think the stock was down like 80 90 percent at one point, and they sold off a big chunk of their product portfolio to McAfee, I think last year. And so there was always something kind of in the works with Mandiant. So it’s not surprising to see them bought. But I mean, this is exactly kind of the type of acquisition that I think we’re going to start to see more of in the next couple of years. Also for Google expanding the cybersecurity, they don’t really have to worry about, you know, it’s not attack or anything that’s really consumer related where there’s a lot more like antitrust concerns. And I think, you know, Google’s not particularly well. They don’t have this dominant position to say Amazon and Microsoft in cloud, but or some of the services. But they’re now moving much more in the, you know, this is more of it on the enterprise side of the house versus the consumer where I think any acquisition they made would be heavily heavily scrutinized right now, like if they were to try to. Yeah. So, you know, this is exactly, you know, they’ve got a big cash pile. So I would expect to see Google Microsoft to be very acquisitive, probably over the next 24 months. Now that, you know, as I think I said in the in the preamble ramble, you know, software multiples, are it basically been cut in half and you want a price to sales, you know, whether you’re looking at forward or trailing, most price to sales multiples have been basically cut in half in this drawdown. In the Nasdaq, maybe they’ve rebounded a little bit, but that means that there’s probably some companies out there that are growing that feel that some, you know, that are in very strong, you know, compelling markets. And we’ll start to see, you know, Google and Microsoft making these acquisitions that are in that sort of single digit billions, maybe even to the into the teens. I mean, obviously, we’ve already seen Microsoft gaming companies escaping me right now, Activision, you know, so we’re going to see adding more acquisitions just like this in the next couple of years, and it’ll be interesting to see who gets. Not in the in the identity industry, particularly now that, you know, the IPO activity is probably close. You know, the IPO window is probably closed for the next next 12 months and potentially longer, depending on where we go. So I would certainly expect more multibillion dollar acquisitions this this calendar year.

Travis [00:07:54] Yeah, and just to know this is the second largest deal Google’s ever made after buying Motorola in 2012. So and third was Nest. So I mean, this is pretty significant for Google, just generally speaking, obviously making a big stand on this one. Google not necessarily leading the pack in terms of cybersecurity against these other peers that you’re talking about. So I think this is to me, a very smart move. I know that, you know, if you read dark reading and everywhere else, you know, it’s I think it’s pretty polarizing in terms of how some of the analysts are looking at this deal in terms of if this was a good idea for Google or not, but definitely seems like, you know, on the right path, Cameron. I mean, do you have any? I don’t know if you have any additional thoughts on on the Google mandean acquisition here or what it means for cybersecurity, generally speaking, please?

Cameron [00:08:47] Yeah, I think what it means to me is we’re going to continue to see digital identity being pulled towards the cybersecurity space like we have cyber security kind of on the edge of our map. But I think when you think about how companies are approaching this cyber security space, they’re looking for deeper integration into cloud, into CRM and IAM. And I would expect to see that’s where Google is kind of bringing the skills and tools of the Mandiant team to bear is rolling more of this cybersecurity posture into, you know, their identity stack more broadly.

Travis [00:09:25] Yeah, and just to throw us some other names here. We drafted down, we’re kind of assessing this deal. We think other other big M&A candidates in the cybersecurity space that stand out tenable cyber are Rapid7 sale points and paying as really interesting, also additional cybersecurity businesses that seem to kind of fit a very similar profile from the Mandiant side. Well, let’s go ahead and move on with love for our audience to, you know, if he has some thoughts on any of these deals, especially ones that we don’t really talk about a lot. Similar to these cyber security deals like Mandiant, love to hear your thoughts on it. Just reaching out to info at the middle of that, CEO would love to have a dialog about it, but moving forward into our more typical domain, my tech and who you obviously one that I think caught several folks by surprise. But you know, it was banked by Jefferies and Jeff Bullhorn. So, you know, very clearly this is a proper process. My tech has already, you know, gone through not just the press release, but getting on the phone, talking to folks. You know, you heard about some of those capabilities. It seemed like this was largely driven by who use capabilities, but also their their own position with orchestration. So if you had that on your bingo card, you can go ahead and hit that for the 10th time in the past 14 months or so. You know, these platforming companies like my tech are very much needing these. These central capabilities like orchestration, so makes a lot of sense. Here you can see in the landscape some of the current solutions that my tech art be had or in that blue color. So authentication, biometrics, proofing, verification and document verification with some new solutions from from who you bring in. And so that any device intelligence and identity wallets, you know from the Identity Wallets piece, this is more related to, I think, how who you was previously well positioned around owning your own data, be able to be able to go and capture or be able to retrieve that information about you. I believe they still have that product offering available to to all of the different customers. So one of the kind of highlight that here, but it does seem like more so that the overlap is related to access to data. The UK market we use got a really good presence out in the UK growing out in Europe, and these guys have obviously been clearly partners for quite some time. You know, Dave, when you see something like this and we’ve talked about platforming businesses quite a bit, right? You saw we saw Jumia with Stop. You know, we we saw hello flow and truly you now we see my tech who you as an investor, how are you kind of assessing some of these acquisitions and some of these platform ID, KYC businesses and how they’re growing and what this kind of means for you, especially as you evaluate other companies in the space, right?

David [00:12:38] So you know, the the important thing to recognize with, you know, these platform businesses, right, is you’re always looking for you’re looking at something where you have shared shared costs and a shared problem across a large set of companies where it doesn’t make sense for them to actually specialize in solving that problem themselves. And so you want to see those development cost effectively externalized into a vendor that can serve, you know, an industry vertical in this instance, probably, you know, it’s a lot of financial services, right? Probably some other regulated, you know, maybe there’s some health care and government services in there as well. And so that’s probably a part of why my tax business, right, is to both buy buy into some of the markets in the U.K. where there’s some special, you know, somewhat specialized or slightly differentiated requirements, which is probably regulatory driven. And then to also, you know, if they have, you know, capabilities that can then be channeled across their other kind of customer base, right? And so right now, we’ve seen companies need to do a couple of different things, one that everybody needs to have a certain amount of first party data or something that’s specialized and unique themselves. But then they also need to make sure that they have all other capabilities or requirements or features covered so that they don’t become displaced or find out that that what they’ve built their business on becomes outmoded, right? So one way to do that is to have an orchestration layer so you can continue to have your specialized capabilities where you differentiate, differentiate yourself and also be able to say, Look, we can also to some extent. Our business isn’t necessarily future proofed, but we’ll be able to integrate and offer easily integrate with any other offering that you may find compelling down the road and you’re not going to then have to displace us as a vendor as a result, right, as a result of some other platform or capability emerging right. So that’s the type of analysis I do. I didn’t catch it, but you guys have an idea of what who use revenue was or do we,

Travis [00:14:51] you know, I mean, obviously, we can guess, I think it’s between it’s estimated between 18 and 24 million roughly

David [00:14:59] there, but somewhere around like five or six times, right? I think the thing that I was actually like, you know, we talked about some of the inside baseball or whatever on these acquisitions and headlines. And so one of the things that I thought was unique and worth calling out was the 98 million pounds, right? And typically, when we’ve talked about things that look like, you know, usually when somebody is putting the deal price in there, it’s because they really want it to be known. Somebody wants to be able to boast about it to a great deal. In this instance, five times, you’re not the biggest. I mean, look, it’s 100 to build 100 million pound, 130 million dollar business. Like, that’s commendable, right? But typically, this is kind of falling below the threshold of like where you would see venture backed businesses putting the deal price in the headlines. And in this instance, the reason it was this is, I think Travis, you mentioned, you know, my tech’s market cap is like six hundred and $30 million. So this actually rises to a level of like materiality, you know, rise to materiality threshold where my tech actually has to disclose this to their to their to their shareholders. If this were like Google, you know, buying this, this would be like, you know, you know, one one hundredth of a percent of their market cap or like something really de minimis. And then you wouldn’t even see an acquisition like this, like the acquirer mentioning like the deal price. So I just thought I would like kind of like, share that little tidbit because I want to see, you know what, the next one? And I don’t mean to like, jump to the next one without giving Cameron his opportunity to chime in. But like, you know, with the Avast secure key acquisition and when they bought Evan M., we didn’t see those deal prices being announced right now.

Travis [00:16:46] I think that’s actually really helpful. And just want to make sure that the audience knows that the estimated revenue is definitely estimated revenue we have now, you know, with no insider knowledge of that.

David [00:16:57] Yeah, I mean, it wasn’t in any of the press releases. I guess we found a random like done in Broad Street by page that’s estimated at like 15 million. So somewhere in the like, you know, single digit, which means like look compared to where so they were bought for like single digit price to sales. I think we’ve seen we’ve all heard, you know, how in the private markets, we’ve seen some ATV companies being having private funding rounds like green cards were like 20 crazy, even 100 times, right? So this was probably a company that, you know, was growing but growing modestly and had been built to a point where, look, they weren’t all of a sudden going to turn into a company that was growing 100 percent year over year. And so, you know, that’s a point where it probably makes sense to sell. And so, you know, good for both my tech and who you for, you know, figuring out how how to create a win win win, you know, out of a situation like that.

Travis [00:18:02] Cameron, know not not to squeeze you on time, what let you definitely cover more of the next one here, but what are your thoughts in a minute or so here

Cameron [00:18:11] a minute? I don’t know about all that. No. Look, I think, you know, orchestration strikes again, right? This is something we’ve been calling out across multiple of these events that, you know, we are seeing a ton of movement towards this orchestration mindset and that for the platforms that don’t have these capabilities, they either need to develop them or acquire them. And I think when you’re looking at the past set of transactions around the space, whether it’s Moody’s and past for truly you and hello Flo Julian for Stop, this is is right in that same vein, and I think I would expect to see the other, you know, more swallow a ball, if you will. Companies that have these orchestration capabilities look to be targeted by acquirers sooner rather than later.

Travis [00:18:59] Yeah. You know, I do wonder and I am conscious of time here. We see a lot. You know, there’s a lot of innovation left in the space. There’s a lot of companies that have not been started yet. And I just wonder how much more the market is willing to buy orchestration companies that have been created in the last couple of years, right, or are currently in the in the startup founder phase. Just something to, you know, something I’m mulling over here is when does this capability become so ubiquitous or something that can be replicated internally over a set set amount of time that does not require an acquisition? So.

David [00:19:50] I mean, look, I think it depends on the, you know, the market, the market, the market that you’re serving, right? I mean, there are certain, you know, global banks which have built their own orchestration capabilities for different parts of identity, maybe not always ITV, but potentially a medication or something on the authorization side. So I think there’s a budgetary question for the in the end market, like what are you serving like, you know, middle market or mid-cap companies or, you know, who are you serving? But like, look, every orchestration is no longer like a novel concept. So I think if you’re starting today with orchestration, you better be figuring out. What else is differentiated is at the end market you’re surveying, like Africa or, you know. You know, what is it? That’s different because orchestration is pretty ubiquitous right now, whether it’s in any part of the identity services stack, right?

Travis [00:20:53] Yeah, no, exactly. And you know, and I think that’s worth noting because we do have a lot of founders that that follow this, this web series and if they reach out and please do continue to reach out to everybody. But you know, I hear this a lot. Hey, I’m thinking of starting a company around orchestration and I say, Well, I think, you know, if I would, I would love to have gotten this email in 2018. Right? I would have invested it. Yeah, but let’s keep moving on here. I know we we’re coming up on time. So the second deal here that we wanted to cover is a fast and secure cookie. Really appreciate. You’ve asked, putting us in their press release under the liminal moniker. We we do appreciate that with a reasonable identity report. And if you have if you’ve not already read our identity report, I think that would answer a lot of questions about this acquisition and how we are viewing it. So I will go ahead and say that we have a much longer response to this that is in a written form, and you can check that out on the website yourself. So what we have here, you know, what we know about Avast is they are very interested in consumer digital identity, right? They have over 400 million users. We’ve talked a lot about Avast in the past. We covered it with the Evan M acquisition a few months back. I believe we even talked about it when they hired Charlie Walton to come in and lead this business unit, so they’re clearly making the right steps. Andre, the CEO of Avast is is a nerd just like us on this digital identity front, knows this stuff super cold and has a really strong vision for how Avast can play a significant role for consumer digital identity going forward. Secure Key makes a ton of sense in my mind for for Avast. Clearly, when you think about building consumer digital identity, especially around reusable identity, you need a few things. We talk about this a lot trust versus ubiquity, you know, secure. He has proven that they’ve been able to to optimize both of those for specific communities as they’ve launched their verified at me product in multiple markets and seeing a lot of success in Canada. You know, they built the they built the framework to which people have begun to model when looking at how to deploy personal identity ecosystem style identity networks. So when you think about a company like Avast, to me have been both a company like Evernym, which is able to create verifiable credentials with a company like Secure Key that have been proven to create identity networks that you you combine that with a very large consumer base that already exists 400 million users under Avast. You have yourself a very a really interesting opportunity for 400 million people to be connected into a a trusted identity network where their credentials, which seems like a strong story out of the gate. I’ll put, I’ll stop talking there. But you know, Cameron, since we cut you short on the last one, I’ll kick it over to you to to, you know, kind of give you this from.

Cameron [00:24:18] Yeah, look, I think where we understand that that they want to play is exactly in this personal identity ecosystem space, obviously a vast has what we would consider to be maybe one of the most untapped pools of identities in the market today, with several hundred million active users of their platform. And I think when you combine what they’ve purchased with Evan in and then think about what they’re acquiring with secure key, the broad strokes really start taking shape in terms of where they feel they can combine that existing touch point they have with the frameworks and tools that allow them to bolt on a more meaningful set of identity attributes to those existing relationships between physical humans and their underlying devices they’ve already built with their network of deployed cybersecurity products. So really excited to see where they take this next. You know, I think, as Travis alluded, we remain extremely bullish directionally on this space. And, you know, I think they have a good of a right to win as anyone else.

Travis [00:25:30] Yeah. Dave, I know you were. We cut you off on the last one, actually, where you have to get into love it. Well, no,

David [00:25:37] I mean, look, I look, I think the interesting thing to watch here is, you know, Social Security, if you look at some of their product marketing language, you know, kind of shifted away a little bit from emphasizing kind of blockchain and self-sovereign identity, right? Whereas, you know, 2016, 2017, they were very big and heavy on being sort of an SSI company. And now they were working with, you know, they were a big Hyperledger participant and et cetera, et cetera. But I think the interesting thing here is just, look, you know, the Erastus part, every name not only about security and the two companies that have been part of the decentralized identity or self-sovereign identity conversation for a very long time. So it’s interesting to see a company that like just as you guys say, it has a very big user base. Clearly, I mean, I don’t know what it is, but clearly they’ve got, you know, some sort of view about how decentralized identity and SSI is going to evolve, but also how you actually commercialize it, which has been, you know, the struggle for for most companies. I mean, I know security had a big, you know, a big user base because of their relationship with the Canadian government and then also the financial services, you know, sort of players in Canada, but, you know, didn’t really push outside of Canada. But like so it’ll be it’s going to be very interesting to watch, like if they make a third acquisition this year and in the decentralized identity space, I’ll really be like impressed that somebody is taking a view of how to like, roll up, like decentralized identity players and turn it into something, you know, make you know, make, you know, rock soup, I guess. But you know, it’s like, Let’s see what happens. Like, it’s it’s interesting. Like, I’m I’m intrigued.

Travis [00:27:24] It is interesting. You know, when I look at the landscape here and you know, this is one of the areas that I think is super interesting because you can say like, well, we love to see kangaroo and sea on the landscape. And there are some spots here that are very clear, you know, breaks. You have one specifically with the identity and access management bucket. We have all these consumers, all these reusable identities. We can tie that quickly into a Siam type of capability. So I expect to see something in customer and additionally, that you’re talking about financial institutions talking about these identity networks. I think you can start to think about identity proofing as an area that these guys can can start to bolt on you. And once you have strong enough network effects, fraud detection and prevention becomes a pretty, pretty clear opportunity for them. So if you’re looking at this landscape and you’re looking at where they’re positioned. It looks all over the map if you kind of squint your eyes a little bit, but generally you think about the consumers, you think about this large user base, you think about verifiable credentials, you think about the positions that security and every had with governments and other trusted authorities, like financial institutions. Very quickly, a few of these segments start to pop out, so I would not be surprised to see to see Avast make some either partnership announcements or some form of acquisitions in these same and identity proofing space. That’s where my money would be going for betting against that one. And with that, guys, we’re going to go ahead and move to kind of closing this one out here, I know we skipped February, hopefully March made up for it. You know, we’ve been very busy. We’ve produced some recent research. If you haven’t already read it, the market opportunity for is about any and how to get there. A report early February, which is a it’s the largest research report we’ve done here. It’s a culmination of five years of working with hundreds of organizations trying to think about this problem statement. Many of the organizations we spoke about today and what those problems have been so far and where we think that’s going to go. And and, you know, just one of those things we do think private public partnerships will be a very big component here. So if you don’t know what I’m talking about, definitely download that read, read that opportunity. And and for our members, we’ve just published our latest outside and report on the crypto economy and its role in the digital identity ecosystem. If you are a member and listening to this, you obviously know about all of our research. If you are not an existing member, we publish regular outside and reports every couple of weeks where we dig into a topic that we want to nerd out on. And of course, you know, we think it’s very interesting, but we’re also very interested to know what’s interesting, you guys, so we can pick out the right research topics to to to dig into. And if you’re interested in membership, you can go ahead and reach out to us on our website directly to learn more about what that entails. And speaking of our website, we’ve recently improved, improved it quite a bit by adding our digital identity landscape. So if you were watching this and saying, hey, that new lands that landscape you got on there looks pretty new and shiny, it is. We’ve released our latest landscape in February, and we’ve redone our website to include a deep dove into the digital identity landscape for to to a whole video series on how to read the landscape, what’s new with that landscape, as well as a whole historical breakdown of our past landscape. So you can kind of click through what all of those look like and what some of those ships were over time. And read some of our blog content on our analysis of what was going on at the time. So quite an interesting resource, definitely to bookmark in your browser. And then last but not least, what to look forward to here at Liminal. We have our little summit coming up in early May. It is sold out, so probably should’ve told you guys. But if you if you don’t know now, you know, if you are interested in joining us in person, it is an executive summit. We have 100 people, typically CEOs or the C-suite and a bunch of investors. If you’re interested in learning more about that for our next summit, go to our website and leave us. A note will make sure you’re added to our distribution list for more information as it comes out. And with that, I just want to go ahead and thank everybody for joining us, Cameron. Dave, as always, good to hear your opinions on this interesting market. I’m sure we’re going to have a whole bunch to talk about in April as this market gets even more interesting. Any final thoughts from you guys?

Cameron [00:32:24] Yeah, you know, check out the website. Obviously, I think the Pai’s report is going to be even more critical to our perspective of the landscape as we move forward. If you haven’t given that a read, please do. And if you’re going to be at the summit, excited to see you there, if you missed out, hopefully you can join us next year.

Travis [00:32:43] All right. Thanks, guys.