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New research shows private wealth the main source of funding for European VCs

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The world’s wealthiest entrepreneurs are now allocating more of their own money into funding the next generation of tech startups, creating a virtuous circle of putting smart money to work, according to research from Dealroom.co for Talis Capital.

Using data from CapGemini, Forbes, Bloomberg, UBS, Wealth-X, and KKR, the report reveals that tech wealth is growing twice as fast as other private wealth sources and in this long-standing low-yield environment, private wealth investment is shifting into European VC funds.

These flows into VC have tripled over the past five years, with longer term equity assets such as venture capital now seen as more attractive investments than buying property.

More entrepreneurial wealth than ever is being created by tech founders – particularly in Europe – and there is a huge appetite to invest in early stage deals which has led to the emergence of a new type of investment firm; a hybrid VC.

Backed by entrepreneurs, and capable of sourcing and leading high-growth investment opportunities, these hybrid VC funds can be flexible to the ever-changing market.

A complementary survey, carried out by Talis with a selection of ultra-high net-worth individuals and family offices to support these findings, similarly reveals that there has been a dramatic shift in the attitude towards venture capital.

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Almost half (47%) of all respondents a decade ago did not invest at all in VC and now 92% are committing their capital to VC. Amongst these investors there was a 5x increase in the number of respondents investing more than 20% of their capital in VC compared to ten years ago.

The rise of private wealth

Over the past decade, private wealth has doubled from $33tn in 2008 to $70tn in 2018. Fewer than 2,760 people hold $9tn globally and the average wealth of these individuals is $4bn. In this time, the share of global wealth held by tech entrepreneurs specifically jumped from $300bn in 2008 (a global market share of 7%) to $1,225bn (or 14%) by last year. 

This is largely made up of private wealth from the likes of established entrepreneurs such as Amazon boss Jeff Bezos, Google’s founding partners Larry Page and Sergey Brin, and Spotify’s Daniel Ek and Martin Lorentzon. However, the more recent exits of European fintech firm Adyen and iZettle have created new tech millionaires, adding a new generation of the uber wealthy to the mix.

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Since 2013, tech exits in Europe have totalled $354bn with $115.5bn worth of exits last year alone. As a result, more wealth than ever before is being created by tech founders across the continent, led by the likes of Spotify’s recent $30bn exit.

At the same time the average age of investors, who have significant capital to invest, has fallen. Since 2011, a Bloomberg survey found that the average age of US investors with $25m or more dropped by 11 years to 47. Research from BNP Paribas found millennials are more than twice as likely to invest in VC funds and startups than other age groups.

Over the past five years, the number of individuals and families using private wealth to directly participate in VC rounds in Europe, for instance, has grown five-fold to a record-breaking $5bn – and 2019 is on track to beat this.

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In fact, Dealroom calculates that 20% of new venture capital funds raised in Europe came from private limited partners and that 18% of the $28bn investment in European startups in 2018 came directly from private wealth.  Not only does this represent a tripling of private wealth into venture capital since 2014, private wealth has now overtaken every other source of funding for VC rounds, including corporate investors and government funds.

Matus Maar, co-founder and managing partner at Talis Capital, said: “We are seeing many more investors wanting to invest in tech and data driven businesses at an earlier stage. In part, this is to do with a new generation of ultra wealthy individuals and families who made their money through tech and want to keep investing in the sector.”

“Originally we were born out of a single family office and over the past ten years we’ve been on a journey which has led us to evolve into a fully fledged VC,” added Vasile Foca, co-founder and managing partner at Talis Capital.

“Having a private-only investor base has been very strategic for us and the way in which we’re structured and how we operate has really come out of the ways in which our investors like to work – we now invest on behalf of a group of over 30 LPs.”

“We predict venture capital and early stage tech investing will only become more popular with the world’s wealthiest, especially as the younger generation are persuading their previous generations that this is where they should be investing,” continued Maar.

“They want to create strong legacy investments and work with exciting smart startups that can improve our world for the better in areas like health technology, sustainable farming and food production, mobility and climate change.”

Mark Richardson, philanthropist and investor, also commented: “Investing via funds complements our own skills, knowledge and expertise in investing and we believe supporting the next-generation of entrepreneurs is a real responsibility.

Our attention is drawn to investing in start-ups that disrupt traditional ways of doing things as well as those associated with sustainability and climate change. We take great pride in having the access and opportunity to invest in this new wave of founders and believe our allocation in this area will continue to increase”

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Tech News

Saudi Hack of Bezos’ Phone Shines Bright Light on Security Challenges | Hacking

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A digital forensic analysis conducted by Anthony Ferrante of business advisory firm
FTI Consulting concludes with “medium to high confidence” that Amazon CEO Jeff Bezos’ smartphone was hacked through a malicious file sent from the WhatsApp account of Saudi Arabian crown prince Mohammed bin Salman.

The malware was in an MP4 file attached to a WhatsApp message.

FTI Consulting forwarded its findings to United Nations special rapporteurs who released
technical elements of the report.

Rapporteurs investigate the promotion and protection of freedom of opinion and expression, among other things.

FTI Consulting declined our request to comment for our story, stating that all client work is confidential.

Saudi Arabia’s embassy in the United States has denied the allegations.

Element of Uncertainty

The reason FTI qualified its conclusion likely is because “computer forensics isn’t always an exact science, and the experts might be limited by the data and evidence they have in hand,” said Tim Erlin, VP of product management and strategy at Tripwire.

“There may also be unanswered questions or alternatives to consider,” he told TechNewsWorld.

FTI’s conclusion “suggests they have a sequence of events that makes it likely that the video attachment carried malware, but they either didn’t prove causality or can’t be sure the crown prince created the hack as opposed to his just forwarding a compromised email,” suggested Rob Enderle, principal analyst at the Enderle Group.

“It rarely gets stronger than this unless the alleged perpetrator confesses, or the intelligence organization gets access to the entire chain of evidence,” he told TechNewsWorld.

The malware “appears to have had a self-destruct built in, making it impossible to have 100 percent concrete proof,” noted Liz Miller, principal analyst at Constellation Research.

FTI’s investigators “did not find even remnants of the malware code on the device, but did find a file with an encrypted downloader that had been delivered with the video,” she told TechNewsWorld.

WhatsApp, which hosted the downloader, has end-to-end encryption, which prevents investigators from accessing the downloader’s contents or code, Miller pointed out.

Chain of Events

The prince
initiated a WhatsApp messaging conversation with Bezos on April 28, 2018, after they met at a dinner in Hollywood.

On May 1 Bezos received a message with a video attachment from the prince’s WhatsApp account.

Within hours, the volume of data transmitted from Bezos’ phone skyrocketed by 30,000 percent, FTI found. Data spiking continued over several months, at rate as much as 106 million percent higher than before the video was received.

“How did it take months for this to be noticed?” wondered Constellation’s Miller.

FTI found that on two later occasions the prince sent messages to Bezos that suggested he had knowledge of his private communications:

  • One, on November 8, 2018, included a photo of a woman strongly resembling Lauren Sanchez, whom Bezos was dating;
  • The other was sent February 16, 2019, two days after Bezos had participated in phone conversations about the Saudis’ alleged online campaign against him.

The UN special rapporteurs have linked the hack of Bezos’ smartphone to stories in his newspaper, The Washington Post, about the role of the Saudi prince and the Saudi government in the murder of Post journalist Jamal Khashoggi.

Pegasus Threat

“I can’t remember how many times in the past decade I’ve read something about a critical security flaw in WhatsApp that allows access to users’ phones,” remarked Oliver Münchow, founder of security awareness and training company
Lucy Security.

“I’m surprised no one told Jeff not to use it after its history of epic security fails,” he told TechNewsWorld.

The malware used was “most likely mobile spyware such as NSO Group’s Pegasus, or, less likely, Hacking Team’s Galileo,” FTI’s analysis suggests.

The Saudi Royal Guard acquired Pegasus-3 spyware from NSO Group, an Israel-based firm, FTI found. The spyware also was used against Saudi dissidents.

Pegasus spreads through malicious links “often sent through chat apps like WhatsApp and Messenger,” said Paul Bischoff, privacy advocate at
Comparitech.

“Once on a device, the malware jailbreaks iPhones so that it can track phone calls, texts, keystrokes and location, and access the phone’s microphone and camera. It also affects Android phones,” he told TechNewsWorld.

Consumers “must maintain a healthy sense of paranoia when it comes to links and attachments,” said Rosa Smothers, senior VP of cyber operations at
KnowBe4.

“Think before you click on any links or attachments sent to you,” she told TechNewsWorld. “Were you expecting the email or attachment? If your spidey sense tingles, call the sender and confirm they sent it.”

That said, “security always ranks high on surveys of the things consumers want, but no one is ever willing to pay for it,” remarked Jim McGregor, principal analyst at Tirias Research. “As a result, it’s never a priority.”

Security also is challenging because of the rapid pace of technology, he told TechNewsWorld. “Artificial intelligence should eventually improve security, but nothing will ever be 100 percent secure.”

Aftermath of the Hack

The UN rapporteurs have called for an investigation into the hack and said the use of WhatsApp as a platform to enable installation of Pegasus onto devices has been well documented.

Meanwhile, Facebook and WhatsApp have
filed suit against NSO Group Technologies in a U.S. federal court, and a court in Israel
has begun hearings to determine whether the NSO Group should have its export license revoked.

NSO has denied allegations against it.

“If someone with Bezos’ power and position is a target, it doesn’t bode well for anyone who doesn’t have that level of protection,” Enderle observed. “It makes you wonder how many other U.S. citizens are being spied on like this by a hostile state.”


Richard Adhikari has been an ECT News Network reporter since 2008. His areas of focus include cybersecurity, mobile technologies, CRM, databases, software development, mainframe and mid-range computing, and application development. He has written and edited for numerous publications, including Information Week and Computerworld. He is the author of two books on client/server technology.
Email Richard.



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