Sasha Grutman, Partner, Middlemarch Partners

“When there’s a cybercrime against a financial institution, the brand erosion can be far more damaging than it
would be for other kinds of companies.”

  •  Depending on the size of the investment, an investor will bring in a security expert to look
    critically at the target company. That consultant will come back with a cyber risk report and recommendations for addressing
    gaps in security.
  • When evaluating an investment opportunity, the first considerations are always the business fundamentals of the product, market
    engagement, and business design. Cyber risk comes right after those fundamentals because it is an exogenous factor that can devastate a good business.

“When we look at a company, one of the first questions we ask is whether anybody is responsible for technology security. . . . That’s the first sign that the company is taking cyber risk seriously.”

In serving as a merchant banker for ventures that focus on financial and business services, Sasha Grutman, partner at Middlemarch Partners, has two levels of involvement when evaluating cyber risk. He explains, “Like an investment banker, I am an intermediary. I help people raise capital for technology-enabled financial services and business services companies that use technology to either disrupt an industry or enhance service delivery in an industry. As merchant bankers, we also co-invest alongside lead investors in some of the deals that we bank.”
In his investment banker role, Grutman works with companies to raise capital, guiding them through the process of presenting themselves to potential investors. This work includes helping them shape their cybersecurity story in a way that satisfies investors. Potential investors may and often do choose to hire a third party to perform their own security assessment. As a co-investor, however, Grutman becomes more directly involved in cybersecurity assessment, working to understand the strengths and weaknesses of a company’s security practice and, if necessary, bringing in a third party for a deeper look.

This is an excerpt from 7 Experts on Evaluating and Managing Cyber Risk for Investors.  This eBook was generously sponsored by BlueVoyant.