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Transforming the cyber security sector

What drove us to invest?

Red Sift is a provider of cybersecurity technology led by experienced co-founders, Rahul Powar and Randal Pinto who had previously built Shazam. They founded Red Sift with the belief that existing cybersecurity products weren’t doing enough to protect organisations from online fraud. Red Sift has had a significant impact on the $6bn cyber security sector. At launch, the founders chose to focus on cybersecurity, in particular email security, because it’s here that the problem is most acute with over £2.3bn lost by companies last year.

Using the Red Sift platform the team created “OnDMARC”, a product which helps businesses to quickly and easily enforce DMARC in an automated, user-centric way. There has been a significant rise in the number of cyberattacks in recent years, and Red Sift has experienced a surge in businesses keen to quickly and securely implement DMARC.

How has the business grown?

We first invested in Red Sift in June 2016, leading the seed round. The company was pre-revenue with a valuation of <£5m. We have participated in each subsequent funding round including the most recent $54 million Series B funding round in February 2022 which valued the business in excess of c.£130 million as it focuses on expanding into the US market. The business has raised $69.8 million to date.

Negotiating a partial exit for our existing investors

The most recent funding round was oversubscribed for new money into the company. This demand led to a unique opportunity for Oxford Capital investors. We engaged with RedSift and new lead investors Highland Capital to begin a secondary exit for the seed stage investors. This enabled early-stage Oxford Capital investors to sell 50% of their shares that had been held for the three year EIS qualifying period, generating gross tax free returns of over 7x capital invested.

We remain invested in the company, which gave both new and existing investors the opportunity to reinvest therefore retaining the potential of further up-side as the company continues to expand globally and into new product areas.

Estimated reading time: 2 min

 

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  1. You could lose all the money you invest
    1. If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
  2. You are unlikely to be protected if something goes wrong
    1. Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
    2. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
  3. You won’t get your money back quickly
    1. Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
    2. The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
    3. If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
  4. Don’t put all your eggs in one basket
    1. Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
    2. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
  5. The value of your investment can be reduced
    1. The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
    2. These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.