For decades, users have largely viewed digital security as a disconnected collection of activities, such as updating anti-malware software, changing passwords, or participating in some form of social engineering training. At Inovia, where many team members of our team have built and run security companies, we see that the future of internet security is much more than the sum of these parts.
In fact, we see a future where the infrastructure underpinning all of the workflows on the internet allows people to do business with those they know and trust in a fully transparent way. And we see a future where privacy, security, and trust aren’t viewed as barriers but rather assurances built into every piece of data stored and exchanged. Inovia’s investment thesis around this next generation of trust drives our search for founders in the space; it addresses an issue of concern to all founders across our portfolio and beyond. It’s a rapidly evolving area that we are excited about, and we’re doubling down.
Build Trust, Win More Deals
In 2019, I first met Ray Kruck, the CEO of Tugboat Logic, while volunteering together as CDL-Rockies mentors. It was then that I realized we shared a common vision. With Ray’s deep experience in digital security, he had the unique insights to position his company to meet what was then an emerging market need; virtually every SaaS company required SOC 2 certification to address the growing number of sales objections they were facing.
As I got to know Ray, I was amazed at how quickly he had stood up a team in Calgary, built a product, and entered the market with a simple yet compelling value proposition. And it’s worth pointing out that as an experienced operator, he didn’t actually need Inovia’s investment to continue growing his business. Nevertheless, when he tried to forestall the financing, he was quickly met with numerous competing term sheets from other great firms.
By March 2020, Inovia had become Tugboat’s largest investor. Meanwhile, Ray was continuing to execute his master plan. Beyond making it easy to get SOC 2 certification to help companies address sales objections, Tugboat was becoming a sought-after security assurance partner with the brand promise of taking the misery and mystery out of security audits; leaving businesses to focus on winning more deals and staying secure.
A Massive Opportunity
Ray’s approach has resonated. Revenue growth has unfailingly exceeded plan since the day we invested some 18 months ago. Headcount has also exploded five-fold during that time to help build the platform for the even greater growth yet to come. And the market has noticed, as numerous other startups are emerging in the space, many of which have been rewarded with large and widely publicized financing rounds. Having said that, it’s not clear that any have done as well at actually growing and servicing customers.
As Ray set his sights beyond the billion-dollar business he had in the making, he identified a greater opportunity, one with the potential to be a hundred times larger. Every business is searching for an overarching system to define and operationalize its various systems of trust, including privacy, security, and data governance. Recognizing this, Ray approached his board with a startling proposal: a shortcut that would allow him to turn this opportunity into a reality.
From Opportunity to Action
One of the keys to my success as an entrepreneur is efficiency, by which I mean searching relentlessly for shortcuts to meet goals. In this light, Ray described being contacted by Kabir Barday — the Founder, President, and CEO of OneTrust. “While we had ignored acquisition interest thus far, this one was different. Kabir got it. Teaming up with OneTrust was a way to accelerate and derisk achieving Tugboat’s vision while at the same time forging a credible path to that much larger market opportunity. As we got to know Kabir and team, we saw that they had also enjoyed amazing growth with incredible capital efficiency, and at a much larger scale.”
OneTrust is a fantastic business that aligns beautifully with Tugboat’s vision and Inovia’s investment thesis in this space. An acquisition by OneTrust is a great outcome for both companies, including their customers, employees, and investors. We’re delighted about this exit and the opportunity to continue to work with Ray as a key executive at OneTrust.
If you are a founder in the digital security space, reach out, we’d love to chat!