With the threat of terrorism increasing since the start of the war in Iraq, it is not surprising that A4Vision Inc. was able to close a $3 million Series A round of funding.
The Cupertino, Calif.-based company has plans to keep America safe by keeping terrorists out. A4Vision develops and licenses identification systems and 3D-face recognition technology.
The 2 1/2-year-old company’s products will compete in a crowded market for private companies and government agencies that want to control access to their offices.
A4Vision CEO Grant Evans is counting on growth to come from laws put into effect after 9/11. “Biometrics are mandated to be used by the Immigration and Naturalization Services (INS),” he says, adding that the new rules will require “all foreigners” who enter the United States to have an ID card with their photo as well as another identifying mark, like a fingerprint.
“It will be a law for a fingerprint to be taken or a face to be scanned and stored on the ID card,” he says. “If that person is trying to get on a plane or gets pulled over, he will have to present the card. If the information doesn’t match, that person is in big trouble.”
A4Vision didn’t inititially have a government focus. “Before 9/11 our destination markets were commercial access entry and cosmetic surgery face scans,” says Enzo Torresi, managing director of MyCube USA, which led the Series A deal. “After 9/11, we realized this was an interesting tool for security. At that point, even though I was the managing partner [of MyCube USA], I decided to take over as chairman of the company and hired Grant.”
The change in focus makes sense, given the the U.S. government’s keen interest in biometrics. The government passed the controversial USA PATRIOT Act, which encourages all levels of government to spend their IT budgets on authentication security. Additionally, the U.S. Department of Transportation has launched a pilot program using biometrics in 20 airports around the country.
“U.S. citizens that travel frequently may want to get a card for less hassle and there are programs that are being experimented with right now called the Registered Traveller’ and the Trusted Traveller.’ It will help people move through the system, because they know who you are. A poll of travellers found that 87% of them have no problem providing a biometric, because most of the people who travel are good people. It’s the ones that don’t want to provide a biometric that we have to be wary of,” says Evans.
Civil libertarians, of course, have a completely different opinion about the government’s tactics. The PATRIOT Act has been roundly criticized for invading the privacy of law-abiding citizens. Cities around the country have passed resolutions defying what they see as efforts to restrict civil liberties.
The uncertain future of the PATRIOT act is a risk factor for A4Vision. But an even bigger challenge for the startup is finding customers, since the biometric industry is mature, with many large companies that have longstanding relationships with the U.S. government.
A4Vision will need a big war chest – or a magic bullet – to overtake its competitors. With the new round of funding, it has raised just $5 million. It plans to start looking for another $5 million to $10 million within six months.
Evans says he expects it will take three to fours years for the government to fully implement biometric technology, therefore leaving A4Vision without full market penetration for some time. “Our most important market will be governments and then the commercial market,” he says. “We are working with federal agencies in the United States and the Italian and French governments. There are projects happening.”
A4Vision expects to bring in about $3 million in revenue this year and break even at the start of 2004, depending upon how fast the federal government adopts its technology.
The Series A deal was led by MyCube – a $100 million fund promoted by Pirelli and funded by the European Investment Fund, Benetton Group, Merrill Lynch, Banca Intesa and Mediobanca, an Italian venture firm spun out of Pirelli. MyCube also seeded A4Vision with $1.3 million.
The other investors in the A round were Silicon Valley-based venture capital firms Sunrise Capital and Hannah Ventures, which put in about 10% of the money, law firm Wilson Sonsini Goodrich Rosati and several private investors.
While A4Vision’s government security business has yet to take off, it already has some clients through an agreement with peripheral maker Logitech. Best known as a maker of computer mice, Logitech also makes technology that enables Web cams to target and automatically track a person’s face, keeping it centered within a camera’s field of view. Logitech’s customers include large-scale businesses. A4Vision also counts Siemens Auselda as a client.
The new funds will be used to continue the development of the company’s technology, marketing products and applications and landing customers.