Permira Takes Majority Stake in BioCatch at $1.3B Valuation

Private equity giant Permira acquired a majority stake in BioCatch to accelerate the behavioral biometric intelligence stalwart’s global expansion, product road map and overall growth.

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Permira’s ownership will help Tel Aviv, Israel-based BioCatch expand its presence in key financial markets such as Germany, France, the Netherlands and Japan and pursue mergers and acquisitions to protect against AI-based threats, according to CEO Gadi Mazor. He said Permira will capitalize on BioCatch’s existing position of protecting 450 million users and monitoring 10.5 billion sessions monthly.

“Permira has the very same mindset of thinking about growth, thinking about possible M&A, and building a bigger company,” Mazor said.

All Roads Lead to M&A?

BioCatch to date has carried out only a small acqui-hire transaction in 2020, but with Permira’s backing it wants to pursue acquisitions that help with detecting generative AI-based impersonation attacks or other common types of AI-enabled fraud, Mazor said. As fraudsters use AI to more convincingly mimic users, Mazor said technologies and strategies are needed that can distinguish between human and bot.

“Gen AI is more of a threat in our space than the use of gen AI for defensive technologies,” Mazor said. “Our approach is to basically protect the end user from being fooled by gen AI. And that’s a component that we find interesting potentially in M&A.”

Mazor said BioCatch’s use of behavioral biometrics to monitor user behavior and detect fraudulent activity is a key differentiator in the market. Unlike other types of controls such as passwords or two-factor authentication, biometrics offer comprehensive security without adding friction to the user’s experience since it relies on passive monitoring to secure digital transactions, he said,

“Looking at the behavior of the user passively is the only way that both increases the security as well as having nothing to do in terms putting more hurdles or more friction in the journey,” Mazor said.

BioCatch goes up against providers focused on transaction monitoring, device signals and location signals in the broader online fraud detection market, but none of the company’s rivals focuses heavily on behavioral biometrics, according to Mazor. The company has 99% gross dollar retention and 125% net dollar retention, which Mazor said demonstrates strong customer loyalty and existing customer growth (see: LexisNexis, Experian, IBM, F5 Top Fraud Reduction Tech).

BioCatch’s Path to Profitability

The company has been EBITDA and cash flow positive since last year, and it hasn’t needed to raise any outside capital since 2022, according to Mazor. All proceeds from the current transaction will be used to cash out existing investors since BioCatch no longer needs outside money to fund its operations, he said.

BioCatch, founded in 2011, employs 316 people and had a significant ownership interest from Bain Capital since the private equity firm led the company’s $145 million Series C funding round in April 2020. Permira became BioCatch’s third-largest stakeholder in the company after a May 2023 investment, and a year later it became BioCatch’s controlling owner by purchasing shares from Bain and Maverick Ventures.

The company has been led since October 2021 by Gadi Mazor, who joined BioCatch in January 2018 as chief operations officer and previously spent more than 11 years starting and leading mobile application platform Nobex Technologies. During Mazor’s 31 months as CEO, BioCatch has grown its headcount by nearly 55% from just 204 workers at the start of his tenure, according to IT-Harvest.

Permira has a limited footprint in the cybersecurity market; it most recently took Boston-area email security provider Mimecast private for $5.8 billion in May 2022. And two months prior, Permira teamed up with fellow private equity firm Advent International and others to purchase pure-play consumer cybersecurity vendor McAfee for $14 billion in the largest cybersecurity acquisition of all time.