Startup Review: WireTap

Wiretap is a cloud intelligence platform that adopts the latest advancements in cognitive computing, artificial intelligence and behavioral analytics to amplify enterprise value by monitoring the social graph. The Company harnesses the power of its platform’s insights into human behavior and interactivity to create great value for the enterprise. Essentially, WireTap’s products exist to monitor and report on the use of enterprise social networks, such as Microsoft’s Yammer and Facebook’s Workplace and workplace messaging services, like Slack. 

For instance, if some employee were to send a message that is harassing another employee, WireTap’s Aware software would be able to flag that information and send it to the Human Resources department. If an employee accidentally sent a message containing confidential information, the software would be able to remove that information from the message. If information is sent by an employee that would represent a HIPAA violation, the said employee’s activity could be marked and reported upon. In other words, WireTap acts as a safety net for a company’s information, policies, and culture.

WireTap has the potential to improve and increase employee governing, monitoring, visibility and culture protection, as well as productivity. Wiretap software continuously analyzes communication between employees and thus acts as a constant force for organizational change and consistency. As more organizations adopt employee collaboration tools like Yammer Workplace by Facebook, it becomes increasingly important to identify and manage the human risk factor in order to create a dynamic and more productive work environment. The goal of the Company is to reduce costs and improve company efficiency.

 

Problem

Most large corporations and many small to mid-sized businesses utilize enterprise social networks or internal messaging systems. More than 65 percent of threats to a company’s security come from within the organization. These threats include compliance failures, HR policy violations, or sharing confidential employee information. A recent wave of sexual harassment scandals that have swept across the country provide a bevy of anecdotal evidence of the terrible things that can go on in a workplace environment (digital or otherwise). There are also recent reports of employee wrongdoing at major corporations such as the Wells Fargo retail bank scandal from the past year.

A poll run by ABC News and the Washington Post in 2017 showed that 54% of all American women have experienced “unwanted and inappropriate sexual advances” at some point in their lives. 30 percent of women have been sexually harassed by male coworkers and 25% of women identified men with sway over their careers as the culprits. This poll found 33 million U.S. women have been sexually harassed work-related episodes. However, the women in the study suggested that nearly 95% of male perpetrators go undisciplined.

As far as employee fraud is concerned, a study in 2016 found that US businesses lost nearly $50 billion to employee theft of some nature. It was found that approximately $7.5 billion (15%) of this theft was done through administrative means. The use of WireTap could potentially stem some of these losses. There are countless other manners of fraud and employee recklessness that cannot be quantified that still cost a company a lot of money. Wells Fargo reached a $110 million settlement after its fake account scandal in 2017.

One general concern with WireTap’s technology is the “Big Brother” problem, where employees don’t feel trusted because they are constantly being watched and monitored. However, the above statistics show that there are serious issues that WireTap can help prevent. Also, the platform only scans for certain information that employees should not be engaging in in any form. There are no applications regarding employees acting disgruntled or looking to shift jobs. Employees at companies with WireTap should view it optimistically due to all of the benefits they will reap.

 

Market Size

Since this technology is relatively new, it’s hard to say exactly what the competitive environment is like. In 2016, an American Management Association survey found that nearly 80% of major companies now monitor employees’ use of e-mail, Internet, or phone. A study in 2017 found that 99% of the 1,000 professionals surveyed admitted to conducting at least one potentially dangerous action, from sharing and storing login credentials to sending work documents to personal email accounts. 34% of those surveyed store work documents using sync-and-share services, allowing them to access the documents from personal accounts even after leaving an organization. There is clearly a need in American companies for the kind of software. In 2015, American companies spent approximately $200 million on employee monitoring software. That number is expected to grow to $500 million by 2019. However, this is probably a conservative estimate, as much of the space is fragmented and most companies are still trying to figure out what works best for their industry spend.

However, the Enterprise Social Network market size is considerably larger. That market is expected to reach nearly $5 billion by 2020. On a more granular level, Slack, one of the Companies future social network platform, has an estimated $200 million in annual recurring revenue. It is clear that enterprise social networks are only going to continue to grow in size and market. That can only be a good thing for a company like WireTap.

There are plenty of “competitors” in this space, but none that really do exactly what WireTap does. There is also potential that some of these ESN’s try and build out their own monitoring platform, but there is no indication of that happening. It seems more likely that they would acquire a company that already manages employee monitoring. Slack has a valuation of approximately $5.1 billion and has plenty of potential to buy a company like WireTap.

 

Support

The Company’s lead investor is Draper Triangle. WireTap raised $7.85 million  from two rounds in 2017. Draper Triangle is a venture capital firm headquartered in Pittsburgh that has a focus on investing in tech companies in the Midwest. Draper Triangle has several successful exits, such as the Think Vine acquisition by Ignite Technologies and TOA Technologies by Oracle. Although the acquisition price was undisclosed, it is believed that at the time, the TOA acquisition was the largest acquisition of an Ohio-based tech company in history. 

The Company is also currently backed by JumpStart Inc., a venture development organization based in Cleveland. JumpStart provides venture capital and assistance to diverse entrepreneurs and small businesses owners, working one-on-one to establish and achieve value-creating milestones of growth. JumpStart manages the Northeast Ohio Entrepreneurial Signature Program Network, a collaborative group of organizations, supported largely by the Ohio Third Frontier, who work together to help entrepreneurs access the tools they need to succeed.

JumpStart invested in WireTap through it’s NEXT Fund, a $20 million seed-stage, for-profit venture capital fund. Jumpstart also operates its Evergreen Fund, which started in 2004 and is still in operation today as a non-profit investment vehicle. The Evergreen Fund included an investment in CoverMyMeds, a startup in Columbus, Ohio that was sold to McKesson Corporation for an estimated $1.1 billion in January of 2017.

 

Management

·      Jeff Schumann (CEO and Co Founder) – Jeff founded his first software company in high school and had nearly 100,000 customers. He also started a company that tracked Al-Qaeda communications on the internet. He also had roles at Nationwide Insurance where he was responsible for leading all enterprise collaboration across the organization.

·      Greg Moran (COO) - Before joining the Wiretap team, Greg served as Sr. Vice President and Chief Information Officer, Infrastructure and Operations for Nationwide Insurance. He was also appointed the Executive Director, Corporate Strategy for the Ford Motor Company.

·      Jeff Spridgeon (VP of Sales) - Before joining the Wiretap team, Jeff served as an Executive Director of Sales for Dell Software Group. Prior to Dell’s acquisition of Quest Software, Jeff was VP of Worldwide Renewal Sales for Quest. Jeff began his software sales career in 1999 at Aelita Software, and at the time of Quest’s acquisition of Aelita, Jeff was Aelita’s Senior Director of Sales Operations, responsible for sales team leadership, sales compensation, and sales operations.

 

Peter G Schmidt