Online counterfeit and copyright infringement detection firm Red Points has won a Series C funding round of US$38 million led by Summit Partners in Boston. The investment, announced last month, comes a year after the Barcelona-based startup had raised a total of US$24 million in two separate Series B rounds. Those monies went mainly toward opening an office in New York and boosting the company's market position in the US, which now accounts for 60% of its annual revenue of over US$10 million.
Red Points opened an office in New York in March 2018 to better serve its growing US client base. Today, the US market makes up nearly half of its global accounts of about 550 customers. The company gained 80 new clients in the US alone last year – abouta quarter of its new customers – despite its sales team working out of Barcelona, which demonstrated to the company the potential of its growth there.
Red Points' overall customer base has almost doubled from about 300 customers a year ago and the company is now expanding its clientele by an average of 40 per month worldwide. The focus on sales growth is evident from recent senior management changes. In March, global sales passed under the stewardship of Chris Evens, previously sales team leader in tech SaaS multinationals like PTC, ANSYS & Dassault Systems. Last October, Baxter Denney took over as the new CMO after holding senior roles for more than five years in NYSE-listed New Relic, a digital intelligence SaaS platform with over 17,000 corporate subscribers.
CEO Laura Urquizu has said, however, that the company isn't planning to move its headquarters to the US. Red Points retains its main offices, including the global sales team, in Barcelona despite officially registering the company in the Spanish region of Navarre in 2017 during political instability in Catalonia.
Banking on MAGDA
In the last three years, Red Points has established a footprint in automated online detection of counterfeits and content infringements and, thanks to its native MAGDA technology, is forging ahead of itscompetitors. The MAGDA name was chosen in honor of co-founder Josep Coll’s mother, who was also one of the first investors in Red Points.
The idea for the company came from the real world experience of Coll, a lawyer by profession, whose clients' businesses had suffered from copyright infringements. His co-founder, David Casellas, is a legaltech expert, who built his career in digital business while CEOUrquizu made her name both on the boards of tech companies like Lokku and heading up investments for the Spanish savings bank, Caja Navarra.
Traditionally, brand owners have taken legal action to protect trademarks and prevent the sale of fake products. This involves identifying unauthorized sellers and taking them to court. However, the process is expensive and has limited success as the anonymity of the Internet means lawyers often struggle touncover a seller's identity. The alternative is manual removal of counterfeits, which is time-consuming and the lack of automation means it is inefficient in identifying trademark infringements.
Red Points' MAGDA technology deploys multiple detection criteria using different technology applications throughout search and detection, validation and removal. The company has, from the outset, focused on having efficient technology for the removal of illegal content. “We are working with AI like machine learning and deep learning in order to minimize human efforts and create more efficient systems,” said Urquizu.
Image recognition and keyword searches are used to spot counterfeits. Keyword searches, which are performed within the product description, are usually efficient and cost-effective. However, products that do not include the brand name in their description are difficult to identify as fake. Without image recognition, imitations can only be found by searching manually across marketplaces and product listings.
The validation process is the most complex as it examines multiple critical factors at a time. Each criterion varies based on brand and industry vertical. As a general rule of thumb, cheap prices, unverified websites, unknown distribution channels (mostly detected by seller location) and a high number of items in stock are red flags that indicate counterfeits. Validation rules can be automated over time based on the client’s detection history and through machine learning of improvements in the level of protection.
“We started with digital content and then we really made a very interesting decision to put our efforts a lot in brand protection and fake products. This is where the platform that we developed is very strong,” Urquizu told media recently. Today the detection of fake goods sold online accounts for 70% of the company’s business; the remaining being mostly the detection of copyright infringements of digital content.
Increasing piracy crackdown
Red Points now detects over 500,000 incidents of counterfeiting and copyright infringements per month across nearly any type of vertical, including fashion and accessories, household designs and toys. The company is also growing a significant client base in the electronics sector as well as among musicians, actors and sportspersons. Brands like Disney, DOPE, Bang&Olufsen and Cristiano Ronaldo are among its standout clients.
More recently, there have been external developments that could affect Red Points' direction. In February this year, Amazon launched Amazon Project Zero (APZ), offering automated brand protection, counterfeit removal and product serialization (applying a unique code to each product sold to verify its authenticity). For the time being, APZ is accessible by invitation only.
In March, the European Parliament voted in favor of a digital copyright reform proposal, which, among others, would transfer to platforms the responsibility for copyright infringements from user-generated content. Such platforms like YouTube will have to obtain a license for copyright protected works uploaded by users unless some conditions are met. The European Council backed the proposed directive on April 15.
Urquizu believes that such increased concern over online counterfeiting and piracy is overall a positive development. “I personally believe that APZ will be a hugely useful tool to complement a company’s brand protection strategy," she said. "However, counterfeiters are a resourceful and agile group, and we find that they are able to respond to new challenges to their illicit business relatively quickly. In our experience, when policing methods improve, counterfeiters will migrate their sales and marketing operations to other platforms."
Backed by top global VCs, Red Points' total capital raised to date amounts to US$64 million. The other investors in this Series C round, namely Northzone, Mangrove, Eight Roads Ventures and Sabadell Bank, also participated in the startup's Series B funding.
