Somehow, this isn’t quite getting the attention it deserves. Perhaps because it sounds too good to be true. It is both, at the same time. iSec, a startup that has developed secure authentication technology for the Nigerian finance industry has raised [up to]* $10 million from Synergy Capital.
According to sources familiar with the transaction, the investment was for ten percent of the company, valuing the startup at a whopping $100 million.
As far as we are aware, this is the largest known first round of capital to be raised by any Nigerian technology entrepreneur/startup to date. And at such a stratospheric valuation. Everything happened inside of the first quarter of 2014, roughly within two months, from introductions to signing term sheets, according to i.Sec’s founder and CEO, Kayode Disu.
Kayode Disu, 31, is a 2005 Computer Science graduate of Babcock university.
In the first instance, we didn’t know that local investors with such deep pockets existed in our still notoriously risk-averse technology ecosystem. Synergy Capital is a private equity fund focused on Nigeria and Ghana that typically invests between $1 – $10 million in high growth sectors.
A visit to the website reveals that it is made up of two entities. Synergy Capital Advisory (SCA), the financial consulting and business development component and Synergy Private Equity Fund (SPEF) does the actual investing. Both however are for all intents and purposes the same company, and their boards are comprised of individuals with some serious banking and finance bona fides in Nigeria and abroad.
The technology that powers iSec’s value proposition and business model has been in development for at least four years, Disu says. For something that plans to completely change the way banks perceive security, it does make sense that it should take that long. Disu believes that although two-factor authentication by way of pins, tokens and one-time-passwords arose in a bid to mitigate electronic fraud, they are not foolproof.
Sources who plead anonymity say that no less than six banks have been hit with significant losses from cyber theft in the first quarter of 2014.
While contemplating on the futility of bank transaction alerts that offer no form of security, Disu set about creating a more secure alternative to current authentication methods. Four years later, his answer is iSec, an access authentication middleware technology that uses out-of-band methods to authorize a user when they initiate transactions.
In plain english, iSec provides secure authentication for bank transactions that does not utilise SMS or tokens.
“Unlike traditional SMS notifications (alerts) and OTPs for approving online transactions, iSec is a service that protects customers from unwanted and malicious debits on their accounts and also enables the customer with the ability to either, approve transactions, decline them or report fraud real-time. It works across all electronic channels.”
It sounds really good. But first they’ll have to convince the banks to get on the wagon The banks will in turn have to convince their customers to enable iSec as a security feature. One major bank, identity withheld, is about to sign up. Eventually, Disu intends to directly layer iSec’s technology on the whole gamut of financial transaction channels — on mobile phones, ATMs, POS machines and internet banking, for all banks in Nigeria.
iSec’s development benefited from the counsel of actors within Accenture, allowing the team to iterate the technology in response to critical feedback over the years. Within that time, they’ve also managed to scale significant compliance hurdles by getting the Central Bank into their corner. Nigeria’s apex financial regulator has endorsed the startup to work on e-fraud prevention initiatives with NIBSS.
While a big win for the Communications and Technology ministry, it is not clear if the TechLaunchpad accelerator, of which iSec is one of the first alumni, was directly instrumental to the startup’s extraordinary raise. Disu however gives the programme credit for providing funding and support to get the company in a good position to talk to investors. The communications and technology ministry is currently working on raising a $20 million dollar fund to fuel the local technology entrepreneurship pipeline.