IBM announced today its agreement to acquire Trusteer, an Israeli web fraud and malware detection vendor, for an undisclosed sum but which, according to the Israeli press, is estimated to be between a believable $800 million and $1 billion. See jta.org
This marks the second major acquisition by a major global U.S. based company of an innovative web fraud detection vendor in the past 12 months with RSA’s reportedly $350 million acquisition of SilverTail systems, first announced in October 2012, being the first. Indeed the most talked about web fraud detection vendors among Silicon Valley investors last year were these two firms, Silvertail Systems and Trusteer, and for good reason as experience has borne out.
This points out the innovation bed that the web fraud detection market has fostered, as these companies developed progressive products that beat the botnets and fraudsters attacking the financial services industry. This was a clear-cut use case that the companies went after, but their products could work equally well (with some tuning) in many other security and fraud markets.
Founded in 2006, Trusteer has done extremely well in growing its revenues to an estimated $50 million at the end of 2012, mainly by developing software that prevented bank Trojans such as Zeus from taking over and robbing customer accounts via wire or other types of money transfers. These malware variants bypassed the security protections afforded by mainstream endpoint protection vendors who could not keep up with the latest malware strains.
Trusteer took the intelligence it gathered on the malware from its desktop products and pioneered a server-based application that detected financial malware coming into to an enterprise (e.g. an online bank). Many clients found this method extremely appealing as it did not require loading software on customer desktops.
In my opinion, Trusteer sold out at its peak. According to some Gartner clients, it was and is becoming increasingly difficult to defeat financial malware using existing techniques. In the past year, Trusteer started pursuing the enterprise market for advanced threat protection with a new product line called Apex to broaden its portfolio and diversify its financial interests. It’s too early to know how successful that product set will be.
So what’s the future look like? As with most large company acquisitions of small start ups, the talented staff of the latter are likely to start leaving as soon as they either cash out (and many of them, especially the founders, will cash out big time) or as soon as the job isn’t fun anymore. It’s tough for large companies to attract and retain risk-taking innovative employees that seek the agility, creativity and potential for great wealth that small start ups afford.
We’ll keep our eyes on this one – but if it’s like all the others I’ve personally watched, I’d give it about a year or two at the most before the innovative spirit and creativity slowly fizzles out.
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