IoT security startup Cog Systems banks $3.5 million raise led by Mike Cannon-Brookes’ Grok Ventures
Tuesday, December 12, 2017/
“Australian born and bred” cyber security startup Cog Systems has secured $3.5 million in Series A funding in its first ever capital raise, receiving the backing of Atlassian co-founder Mike Cannon-Brookes’ Grok Ventures and new VC fund Rampersand to tackle security issues in the Internet of Things (IoT) sector.
Cog Systems was born in 2014 from the ashes of software company Open Kernel Labs, which was acquired by US defence contractor General Dynamics, leaving then-executive Daniel Potts looking for a new venture.
Bringing across some of Open Kernel’s “A-team”, Cog Systems chief executive Potts and three other founders realised the need for a focus on cyber security for IoT enabled devices, with the tech just starting to come to the fore and massive growth ahead. With significant experience from their time at their previous business, the team set out to encourage and help facilitate device makers to build better and more secure systems for internet-enabled devices.
“Our real ‘high level’ goal in life is to secure IoT, and the way we do that is by working with device manufacturers globally to help them build better security resilience and richness into the products they’re building,” Potts told StartupSmart.
“While we’ve seen huge growth in the IoT sector, the space is still very fragmented. Everything today is connected to the internet, from your fridge to your doorbell. Everything has a form of either direct or indirect connectivity.”
This level of connectivity has seen some large-scale malware attacks wreak havoc on IoT networks, such as the 2016 botnet attack facilitated by over 100,000 unsecured IoT devices that took down a major domain name system provider in the US. These sort of devastating attacks provide a use case for Cog Systems’ technology, says Potts, who says as more and more IoT devices get put in homes, the risks of these attacks increase.
“Right now we’re not winning the war, and if we don’t these attacks will impact our lives,” he says.
Cannon-Brookes backs Potts’ concept
And as the IoT sector stared down that challenge, Cog Systems stepped up to the plate and looked to provide solutions. Moving slowly for the first few years and growing organically, a realisation about the number of potential IoT devices that will be connected by 2020 lit a fire under Potts and his team, setting them down the path of seek funding.
“Gartner predicts there will be 20 billion IoT devices will be in use by 2020, and that’s not that far away. We know we needed to move faster, so we saw the opportunity to raise,” he says.
“When we started talking with some investors, IoT was still a bit mystical. But we told them our story and that security was a huge problem that needed to be fixed or the system would fall on its face.”
Cannon-Brookes’ Grok Ventures has backed high-profile companies such as millennial-focused superannuation fund Spaceship, and the private investment fund led the round for Cog Systems’ raise. Potts says he connected with the prominent entrepreneur through mutual connections in his networks, saying it was great to have “warm introductions” to all their investors.
“Security of connected devices is increasingly an important challenge to solve. The team at Cog are world-class with deep expertise in solving complex problems. They’re building pioneering software that will change the industry and we’re excited to be supporting them,” Cannon-Brookes said in a statement.
Rampersand co-founder and managing partner Jim Cassidy said the investment in Cog Systems is a “no-brainer” for the emerging VC fund.
“Cog Systems was an obvious choice for us almost as soon as we met Daniel. We see a lot of IoT startups, and we’re actively searching for investment opportunities, especially now the security questions are being properly addressed,” he said in a statement.
“Poorly secured IoT devices can compromise systems and create serious disruptions. When it comes to something like cars, and we’ve seen computer-controlled cars hacked, it’s really scary.”
The money will be funnelled towards growth, says Potts, with a decent chunk going on marketing to make sure the company isn’t “the world’s best kept secret”. The team will also be refining its products further to help meet the anticipated scale of the IoT space.
“[The sector] is starting to take off. When IoT is done right, it’s transparent and invisible to customers, and that’s what great IoT will be, and that’s what will add value and not be a burden to consumers,” he says.
Potts says a lot of exciting innovation in IoT is yet to come, and with a low barrier to entry, the companies and innovations will come from all over the world.
“It can be built anywhere in Australia, not just capital cities. We have the right support structures to certainly see these companies happen,” he says.
During the process of seeking investors, Potts says his team put together an “FAQ” document for investors, which helped refine and accelerate the pitching process. He recommends other hopeful startup founders consider using a similar process.
“The other thing I encourage is to start and do your work in Australia. We have a truly amazing and mature startup scene, and I think it’s easier to tackle a new venture here than in the US,” he says.