Flare Systems, a Montreal-based cybersecurity startup that helps financial institutions track and avoid security threats, has closed a $1 million seed round.
Flare, which recently completed the Centech, NextAI, and Desjardins Startup in Residence programs, said the investment will allow it to expand its roll-out in Canada and the USA, accelerate ongoing AI R&D projects, build new features, and develop complementary products to help financial institutions fight cybercrime.
“We are very grateful for having such experienced investors that have a vast network within the financial sector.”
The company also told BetaKit it is looking to expand into the European market and grow its team. The round was led by Luge Capital and also saw participation from WhiteStar Capital. Luge will be taking a board seat while Whitestar will be taking an observer seat at Flare.
“Sensitive internal and customer data is growing massively and hacking techniques to steal that data are becoming increasingly sophisticated,” said David Nault, co-founder and general partner of Luge Capital. “There is a critical need in the market for Flare Systems’ solutions that help financial institutions and other organizations protect their data from cybercriminals. Flare Systems’ powerful combination of cybersecurity tools give a holistic view on the cyber attack chain and enables collaboration between cybersecurity, fraud, and compliance teams.”
Flare’s products take data from darknet sources such as broadcasts of stolen information, private forum discussions, chat posts, and cryptocurrency transactions, and combine it with world-class proven research in criminology insights, then providing that to financial crime teams. The startup wants to take a holistic approach to the complete attack chain with tools that prevent and mitigate attacks on each link in the communication chain of criminals. It does this by automatically structuring, organizing, and normalizing millions of data points from multiple sources.
The company was co-founded in 2017 by CEO Mathieu Lavoie, CTO Israël Hallé, CRO David Hétu, and Yohan Trépanier Montpetit, who is vice president of product. Before launching Flare Systems, Lavoie managed a security penetration team at Desjardins, where he learned the cybersecurity challenges faced by financial institutions. Hétu holds a PhD in criminology from the Université de Montréal, focusing most of his research on identifying patterns of communication in illicit markets on the internet. Hétu has published over 40 articles in the last decade on the structure and inner workings of such markets.
After coming together to create Flare, Hétu and Lavoie then contacted Hallé, who was working for Google at the time and knew Lavoie through a cybersecurity competition. Hallé was also looking to join a startup and the problem Flare was looking to tackle resonated with him. A year after, before the startup achieved any sales, Montpetit joined the team as its last co-founder. Montpetit had experience in developing software solutions using big data while managing teams and acting as a product owner.
During the NextAI accelerator, the team met Aamna Zia, who was also part of the accelerator. Lavoie told BetaKit Zia’s strong expertise in business strategy, international expansion, and mergers and acquisitions was a good fit for the team. She officially joined last April as head of growth.
“We decided to develop Flare Systems after working in the industry and felt that the evolving threat landscape for financial crime not only requires insight and knowledge of how an organization is being targeted, but also the tools to bridge those insights within the functional areas of the business,” said Lavoie. “Today we are providing some of the deepest intelligence available on the market.”
Although the startup’s clients’ names remain confidential, the startup confirmed with BetaKit that it currently has seven recurring clients and three financial institutions as either a client or proof of concept. As part of its growth strategy, Flare Systems is also partnering with security service providers in Canada, the US, and Europe to include its offering in their basket of services.
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In order to expand to Europe, Lavoie said the company is trying to establish itself as a knowledge leader to establish rapport with other cybersecurity teams. The team recently spoke at various events in France and has a proof of concept underway with a bank in Luxembourg. The company wants to take a multi-channel strategy for the European market and is in the process of forging partnerships with managed security service providers to accelerate its expansion in Europe.
“We are very grateful for having such experienced investors that have a vast network within the financial sector,” Lavoie told BetaKit. “Their presence within our board and company will help us with our future endeavours.”
Cybersecurity has been heating up this year in Canada, with a number of enterprise companies and financial institutions taking the issue more seriously as data breaches become increasingly common. Last month, Ernst & Young acquired cybersecurity startup ElevatedPrompt Solutions, while the Canadian Internet Registration Authority has partnered with Atlantic Canada startup Beauceron Security to launch a cybersecurity platform.
The government has also been ramping up efforts to usher in a new era of heightened cybersecurity. The National Research Centre of Canada launched a cybersecurity and IoT hub in Kitchener-Waterloo, and the federal government created CyberSecure Canada, a training initiative for SMBs. Over the past year, the data of 19 million Canadians was compromised after over 400 breaches were reported to the Office of the Privacy Commissioner of Canada.
Flare said a cyberattack takes place every 39 seconds, and the frequency and sophistication of these attacks are increasing. With the growing requirement for more resources and insights from businesses of all sizes, Flare is hoping its technology will help meet the market demand.
Image courtesy Flare Systems