How Citi’s latest cybersecurity bet veers from the usual model
- Citi Ventures participated in a $12 million investment in Dyadic, a startup that helps companies manage their cryptographic keys
- The area of cyber defense startups that studies analytics to find patterns is getting crowded, Citi says
Financial technology trends come and go but three are here to stay: Everyone has a mobile phone, large businesses are moving their data to cloud systems — and threats to cybersecurity are evolving with and around both behaviors.
As the threat cybersecurity poses for financial services – or any company, since they’re all collecting customer data – isn’t going away, these companies are heavily invested in analytics firms that monitor breaches, defenses and other activity to try to make sense of user behavior and identify patterns to help prepare for the next attack. That space is getting kind of crowded though, which is part of why Citigroup’s startup venture capital arm just invested in a newer cryptographic solution by a company called Dyadic.
“There are established vendors of hardware security models and systems we all buy from. They’re trying to prevent or detect threats. We’ve invested in that,” said Arvind Purushotham, global head of venture investing at Citi Ventures. “The Dyadic opportunity came along and was fairly unique, there are not 10 startups in their area.”
Dyadic is a software company that helps companies manage their cryptographic keys, a long string of numbers required to encrypt private information. Citi Ventures participated in a $12 million growth investment in Dyadic along with Goldman Sachs Principal Strategic Investments and Eric Schmidt’s Innovation Endeavors.
In many current systems, there is a key to encrypt and one to decrypt. Dyadic’s solution effectively splits each key into two and allows them to be stored in different places – one half on a company server and the other on a mobile phone, for example, or one half in the cloud and the other in a data center. This way, even if a hacker somehow obtained the part of the key stored in the cloud, it couldn’t use it to decrypt information without finding its pair. The solution isn’t completely unhackable, but it creates an additional challenge for nogoodniks.
The technology is also easy to implement at the types of large financial institutions that would benefit from the product, he added, which counts for a lot when deciding to invest in a company. It’s rarely ever about how innovative an idea is. Most companies using Dyadic’s solution probably already employ cloud storage and have an increasingly large mobile customer base.
“[Dyadic] plays to the trends of cloud, mobile and enables us to make mobile offerings even more powerful not just at Citi but at any enterprise,” Purushotham said. “It is lowering the complexity and cost of a cryptographic system and if you can make it cheaper and easier to use, enterprises will use it more, and more commerce can happen online more securely.”
However, defending a bank and its customers against cyberattacks is as much – if not more – about how companies identify and verify their customers when asking them to hand over sensitive information as it is about identifying the attackers. Many websites now require numbers, capital letters and special characters of their users’ passwords, in order to make their accounts harder to breach. Some have employed fingerprint authentication and let customers store credit card information so they neither have to enter their credit card information or their password.
But financial services is one of the most highly regulated industries, and it has many reasons for requesting certain sensitive information. Some are business-related, but many come back to regulatory compliance.
“Security is sort of a murky problem,” Purushotham said. “We need to collect what we need to collect for a variety of reasons but it’s also our job to ensure the data stays secure inside the enterprise and make it simple for customers to use our services while still making it secure.”