Zia Hayat, CEO and Co-Founder of Callsign, explains how he attracted $35m in Series A funding.
Callsign is an identity fraud, authentication and authorisation company. It was founded by Zia Hayat and Ian Welch in 2012, after Zia had completed a PhD at BAE Systems and roles at Accenture and Lloyds. In seven years, it has grown to be a global firm with over 100 employees and offices in the UK and the US. In 2017, Callsign completed a $35m Series A fundraising round.
“Investors are not some outside party...They have rights and you need to treat them properly.”
Zia Hayat, CEO and Co-Founder, Callsign
If you’d spoken to me 10 years ago about ‘founding a company’, I wouldn’t have known what you were talking about. I never dreamed I’d start a company. But I did know that I wanted to work in computer security ever since Russian hacker Vladimir Leonidovitch Levin attempted the world’s biggest bank heist via dial-up internet in 1994. This ushered in the era of what I call “armchair fraud” – in the 1980s and ’90s, fraudsters walked into high street shops with a stolen credit card; now they can steal from the comfort of their own home, using not one but thousands of credit cards.
So while I was doing my PhD at BAE Systems, I had this idea for how to use a range of information to verify a person’s identity using their smartphone and make online fraud more difficult. But there came a point probably seven years ago when I realised from working at big companies that I couldn’t experiment in the ways that I wanted to while still an employee there. This was for very good reasons; these companies had processes and protocols in place, especially when dealing with data security that I couldn’t break. I talked with a range of people, read about Google and Facebook and others, and thought that I should probably go and do this myself. I had an idea for how to use a range of information to verify a person’s identity, making online fraud much harder.
And I’ve learnt a lot since then. We now employ over 100 people, have offices in the UK and the US, and raised $35m in a Series A financing round in 2017. Before that we were fortunate to surround ourselves with mentors, who invested some money on a small scale, but also advised Ian Welch, my co-founder, and me on how to get the business off the ground.
What I’m most proud of is how Ian and I are problem solvers. We had a big setback early in the business where we had been working in partnership with a tech firm for 18 months on our first major product, and this firm was set to take a big stake in Callsign. One day I went for a meeting with the firm’s head of R&D who was also the head of their corporate ventures arm. He sat me down and said, “Zia, I’m going to tell you something right now and you’re going to hate it, but I’m telling you for the longer term.” He said to me that the technology we were developing was the wrong one because we would become completely beholden to a group of big players, and that we should reverse our strategy. I remember walking out of the building and giving Ian a buzz and just talking, and before we had finished the call, we knew what we were going to do. It was at that moment that I knew we were going to be okay. In fact, we are still pursuing that strategy that we decided on back then on that call.
One size doesn't fit all
The Series A round was the first serious financing round we did. We had got to a point where we had some big companies as investors and, in the small world of investor funding, a lot of people began to hear about us and we started to get some serious offers. We knew we could use this capital to enter international markets and set up offices there, to grow the team and to invest in new products.
To me, raising money is like managing a professional football team. There’s no one way of doing it – you have 11 players with a certain set of characteristics and a certain way of playing, and how you bring them to the top of their game is entirely different to how you’d approach another set of players. Equally, how you raise money from one investor to another or for one project to another is not the same. Obviously, you always have to be on top of the numbers and provide enough P&L detail. Also, many tech companies are data-hungry – especially with AI-based products like ours – so you have to show investors how you will grow your store of data almost as much as you will grow revenue.
On the other hand, you need to make sure you go beyond the facts and talk about the people and the story. And this is especially where you need to adjust depending on the investors. I will always introduce investors as quickly as I can to the rest of the senior team, as they’ll be working with them as much as me. All human beings like to be able to compare one thing to another, so think about which comparisons would suit a particular investor: should you show them how you stack up against your competitors? Or possibly how analogous markets have grown, and how yours is poised to. This last point is especially true if you’re in a new market. By definition there is going to be a lot of unknowns and so how you articulate the space and the opportunity will be important – how you blend fact and figures with the view of the future. For example, when people didn’t know there were cars, they couldn’t see an alternative to horses; when they didn’t know about outer space, they thought the world was flat and never ended. So until people know something, they can’t buy into it, and so how you articulate that and convince them is extremely important.
Meet as many people as possible
There’s no substitute for talking with – and listening to – a lot of people. I spoke with all the top tier VCs. It helped me realise that while I could never work with some individuals, others I clicked with – and that’s also the case in reverse. A potential investor once told me, “Some people do transactions and then try to build a relationship to solidify that transaction, and that’s the wrong way round.” It’s true: you don’t have to be best friends with your investors, but you do have to forge a relationship from the start. So I met with a lot of people but, in the end, we took up three offers. We had generated quite a lot of interest, and we were being offered money from many different people.
It’s also important to make your own decisions about selecting investors. By all means, canvas opinion and speak to people that you trust, but ultimately, as CEO, you have to make the final call. Otherwise you’ll spend your life cursing others. When it comes to making your decision, obviously it’s important that they understand your strategy, what the material risks to the business are and how you aim to combat them – otherwise in more difficult situations you might not be able to count on their support. Beyond this – and most investors we speak to understand the business stuff – it’s really that “click”, making sure that you can go through a lot of ups and downs with this investor and still work together to make the business a success
“I live by the saying, ‘Only the paranoid survive’.”
Zia Hayat, CEO and Co-Founder, Callsign
Respect people's money
Every penny that I receive from someone, I massively appreciate. This is their hard-earned money, their pension. Ian and I once met a man on a plane and, at the end of the journey, he gave us £35k – part of his life savings. To this day he remains an investor, but things like that ground you and instill a sense of responsibility. You also need to realise – and to make it clear to investors – that you’ll make mistakes and spend some money here and there that you shouldn’t. The vital principle is to only spend the money you need to spend, based on solid investment cases.
It comes down to transparency and treating investors as partners. I make sure that I involve them in decisions and keep them updated on everything they need to know. Investors are not some outside party; they have rights and you need to treat them properly. Clearly, if it gets to a point where you can’t agree on something material, then someone’s got to back down – so make sure it doesn’t get to that point. Obviously, as we’ve grown, our reporting for example, has got more formal. The way you report the usage of cash has to be different if you’re speaking to the pension fund of Ontario compared to investors and mentors that you’ve known for years. But the responsibilities you have – the approach you should take – should never change.
Only the paranoid survive
Despite our achievements so far, I feel like we have a long way to go in our growth journey. I live by former Intel Chairman and CEO Andy Grove’s saying, “Only the paranoid survive”. This doesn’t mean exhausting yourself with excessive suspicion, just that you need to constantly question and keep trying to improve. I want to keep growing this company, I want to help solve one of this century’s most pressing challenges and, ultimately, I want to give back to the community I came from. I won’t rest until I make all of that happen.
Zia Hayat is a proud husband, father and Liverpool supporter.
For more on investment, and many other aspects of growing a private business, download our Moments That Make You guide.