Telstra Ventures bets $US100m on building defences against cyber warfare

As cyber attacks increase, Telstra Ventures is investing in the tools to help companies bolster their defences.

One of the companies Telstra Ventures has backed is Boston-based FinTech Corvus, which uses artificial intelligence to assess cybersecurity threats in real time.

Telstra is quietly betting $US100m ($139m) on more than a dozen cybersecurity start-ups to bolster defences for big business as attacks from criminals and foreign powers increase in volume and scale.

Telstra Ventures — founded in 2011 and spun off two years ago as an independent venture capital fund — has invested in 69 companies, 14 of which are dedicated to cybersecurity. The fund, which is also backed by HarbourVest, one of the world’s largest private equity funds, says combating online warfare will become part of everyday operations for businesses of all sizes.

It comes as National Australia Bank said last week it was being hit by nearly three million cyber threats per day, warning the onslaught had amplified during the economic recession sparked by COVID-19.

Meanwhile, the federal government will spend $1.35bn on strengthening the country’s cyber defences in the next decade after Prime Minister Scott Morrison revealed in June it had come under a broad and sustained foreign cyber hack, targeting all levels of government and critical infrastructure operators.

Telstra Ventures partner Marcus Bartram said the cybersecurity companies it had invested in did not compete with one another, with each offering different services, highlighting the increasing sophistication of attacks and the need to have many tools to fend them off.

“It has become a much more industrialised problem now because there is real economic motivation for a criminal to attack a company, and then you also have governments that are active in offensive and defensive cyber as well,” Mr Bartram said.

“The type of attacks that are happening and the sophistication is going up, and it has been even prior to establishing the fund and getting going.

“It’s the way of the world at the moment and companies and individuals need to be sensible and invest in good-quality tools and people to protect themselves.

“Our basic (investment) thesis starts with: is the problem a company is solving and building tech for a real problem or sort of a feature of another platform — if it’s a real problem, how big is it and how many different companies or people could potentially have it?”

One of the companies Telstra Ventures has backed is Boston-based FinTech Corvus, which uses artificial intelligence to assess cybersecurity threats in real time.

It appealed to Telstra Ventures because many insurance policies offering cyber protection excluded premises outside the office or encrypted devices — highlighting a vulnerability as tens of thousands work from home during the COVID-19 pandemic.

On Wednesday, Corvus launched new scan technology that incorporates RDP (Remote Detection Protocol) detection, which is still the most popular entry point for ransomware attacks, given it allows computers to connect to networks remotely.

It comes after Corvus raised $US32m in series B funding, which Telstra Ventures led, in January to incorporate artificial intelligence (AI) in its insurance products.

Mr Bartram said AI was becoming one of the primary tools for fighting cyber crime, given how quickly the technology could digest information from many data points.

“With every emerging IT and technology trend there is an accompanying piece to that, which is how do you make sure how these things are evolving can be secured and people’s data and company data be protected.

“In mid-2005 it was really clear that existing tools that companies were using weren’t up to the job, and so often as new tools emerge to solve a problem criminals get smarter and figured out how to get around it, so new tools need to be built to detect them.

“One of the things we are spending a lot of time looking at automation because you need these processes and tools to all work with each other and be automated so you are not putting people in the process, which just slows everything down.”

Cyber security investments comprise just under a fifth of Telstra Ventures’ $US560m portfolio, which also includes software and infrastructure. It is a formula that has proven successful, with the fund returning $US190m to investors since 2018.

“We are pretty proud of these numbers. It’s been a lot of hard work from people like Marcus who look at where the next opportunities are,” said Telstra Ventures partner, strategic synergy, Gurpreet Ghuliani.

“So far our 69 investments have delivered nine unicorns and three decacorns (companies with a market cap of more than $10bn).”