With a remarkable trajectory in the financial technology sector, an Israeli enterprise specializing in fraud prevention has recently marked a significant milestone. The company, which harnesses behavioral biometric data to combat financial crimes, concluded the year with an impressive 49% growth in annual recurring revenue (ARR), simultaneously eclipsing the $100 million ARR threshold and securing EBITDA profitability.
Permira Growth Opportunities II, a fund managed by the global investment firm Permira, is set to become the majority stakeholder in this pioneering startup, BioCatch, acquiring 60% ownership. The transaction values the company at approximately $1.3 billion, with Permira investing an estimated $750 million. Leading the charge from Permira’s Israeli operations, senior adviser Ran Maidan will oversee the acquisition.
Prior shareholders Bain Capital and Maverick Ventures, who acquired their stakes in 2020 when BioCatch was valued at around $300 million, will primarily be the sellers in this deal. Other investors, including venture capital entities Blumberg Capital and OurCrowd, have been approached by Permira with offers to divest their shares. With a formidable $80 billion in managed assets, Permira recently amassed a new $4 billion growth fund at the end of 2021, aimed at bolstering its investment portfolio in the technology sector.
About a year ago, under Maidan’s leadership, Permira procured a minor share in BioCatch, investing $40 million at a valuation nearing $1 billion. Prior to this latest acquisition, the company attained unicorn status in a secondary transaction executed on the eve of October 7th at a $1 billion valuation. In February, a subsequent secondary deal slightly pushed the company’s valuation above $1 billion, with Australia’s Macquarie Capital purchasing shares worth $32 million from existing stakeholders. Sapphire Ventures and Macquarie Capital have also participated in the recent buyouts but in lesser extents compared to Permira. To date, BioCatch has raised a total of $253 million. Bain Capital, which led a funding round of $145 million in 2020, stands to triple its original investment through this sale.
Founded in 2011 by Avi Turgeman and the late Benny Rosenbaum, BioCatch has been under the leadership of CEO Gadi Mazor since 2018. At the time of Mazor’s appointment, the company reported revenues of $7 million and was valued at $100 million. Fast forward to today, and BioCatch serves over 190 financial institutions worldwide, including more than 30 of the top 100 global banks.
Mazor revealed that all employees at BioCatch have stock options, some of which will be exercisable through the Permira transaction. The company, which employs 320 people, half of whom are based in Israel, will be providing its workforce with a fresh allocation of options.
BioCatch’s platform utilizes behavioral biometrics to differentiate between legitimate users and fraudulent actors. The proprietary algorithm assesses over 300 behavioral parameters, such as typing speed and mouse movement, to identify unauthorized account usage. The company’s technology has reportedly prevented nearly $3.5 billion in losses thus far. In 2023, BioCatch ventured into the financial crime prevention arena, boasting a 98% success rate in detecting abnormal account activity.
Despite the acquisition, BioCatch will maintain its current operational structure, with Mazor continuing at the helm as CEO. Maidan emphasized the goal to unlock new opportunities for the company, including geographic expansion and product diversification through mergers and acquisitions. He also suggested that the current valuation aligns with strategies for future development, including potential IPO prospects. Mazor, too, has expressed intentions to steer BioCatch towards a public offering, citing the disclosure of financial details as indicative of the company’s direction.
Post-transaction, BioCatch will represent Permira’s most substantial investment in Israel. The fund, which also controls Synamedia (formerly NDS), is actively exploring additional investment opportunities within the country, undeterred by contemporary conflicts. Maidan expressed confidence in Israel’s innovative and entrepreneurial spirit, asserting that as long as it continues to thrive, investments will follow.
