MagicCube Raises $15M to Replace Traditional Chips

MagicCube Secures $15 Million to Revolutionize Mobile Security

MagicCube, a startup focused on mobile security solutions, has successfully completed a funding round, raising $15 million. The investment was spearheaded by Mosaik Partners.

Investment Details and Background

Bold Capital, Epic Ventures, ID Tech – a manufacturer of card readers and POS hardware – and several anonymous investors within the fintech sector also contributed to this financing. This latest round brings the total funding secured by the Santa Clara-based company to $30 million since its establishment in 2014.

A Software-Based Alternative to Security Chips

MagicCube’s core technology is a software-based system designed to supersede traditional security chips. These chips have long been the industry standard for safeguarding sensitive data and verifying user access. The company is initially targeting the financial services sector.

Their technology empowers merchants to transform standard mobile devices into fully functional payment terminals. Essentially, it provides a means for accepting card payments on any consumer device without requiring dedicated card readers or additional hardware.

Addressing the Global Chip Shortage

“A significant shift is imminent in how we secure data across various devices, particularly those used for financial transactions,” stated Sam Shawki, CEO of MagicCube. “The current chip shortage, which is disrupting industries and driving up prices, has highlighted the limitations of existing methods and the value of MagicCube’s solution. This funding round is a testament to that.”

Leadership and Founding Principles

Shawki, formerly the head of Visa’s global remote payments division, co-founded MagicCube alongside his wife, Nancy Zayed. Zayed has extensive experience working on the operating systems team at Apple. The pair, both of Egyptian heritage, established the company with the goal of creating a technology that would eliminate the need for hardware in mobile security.

Strategic Investors and Previous Funding

Visa is, in fact, an investor in MagicCube, having provided funding in August 2020 and in a prior round. Other investors include Azure Capital Partners, Epic Ventures, NTT Data, Silicon Valley Bank, and the Sony Innovation Fund. Sony’s venture capital arm invested an undisclosed amount in MagicCube in late May 2020.

Competition and Market Positioning

The August 2020 investment followed Apple’s $100 million acquisition of Mobeewave, a competitor to MagicCube based in Montreal. Mobeewave’s software also enabled iPhones to function as mobile payment terminals. Despite this acquisition, Shawki is confident that MagicCube “will become the leading provider on the Android platform, which represents 85% of the market.”

Introducing SoftPOS Technology

MagicCube’s initial focus is on software POS, or softPOS. This technology allows merchants to accept payments using a smartphone or other mobile device, eliminating the need for traditional POS terminals. Contactless card and digital wallet payments can be processed securely across a range of mobile devices, mirroring the security level of chip-based transactions.

EMVCo Recognition and Security Standards

MagicCube asserts that its software-based Trusted Execution Environment (sTEE) is the “first and only software solution” to receive recognition from EMVCo. EMVCo is the organization responsible for overseeing the global infrastructure for chip-based payment cards and acceptance devices, and its endorsement signifies a comparable level of protection to hardware-based solutions.

Simplifying Security Through Software

“Our technology’s primary benefit is simplification,” explained Shawki. “A traditional credit card contains a SIM card that acts as a physical safe. MagicCube offers a virtual safe, entirely software-based, that secures secrets and code with the same purpose. This is significant because, unlike competitors, we can conceal information within this virtual safe… and this has been proven, patented, and is a substantial advancement.”

Versatility and Broad Applications

MagicCube states that its sTEE is adaptable and can replace hardware-secure elements in various applications. These include SIM cards, chips used in Internet of Things (IoT) devices like automobiles and smart home appliances, and even bank-grade Hardware Security Modules (HSMs). The company’s first product, i-Accept, is designed to disrupt the $70 billion-plus annual market for point-of-sale card readers.

i-Accept: A New Approach to Payment Acceptance

Through i-Accept, acquiring banks and financial institutions can enable merchants to accept card payments, contactless transactions, and mobile wallets like Apple Pay, Google Pay, and Samsung Pay at “card present” rates. This also allows for unlimited transaction amounts for consumers. MagicCube claims that i-Accept can also capture financial PINs and other verification methods on any mobile device without requiring dedicated hardware.

Future Plans and Expansion

The newly acquired capital will be used to accelerate the deployment of MagicCube’s software-based security products. The company also intends to expand its sales and customer support teams and expedite the development of solutions for industries heavily impacted by the chip shortage, such as crypto wallets, cloud security, and in-car security.

Industry Validation and Future Outlook

Howard Mergelkamp, a partner at Mosaik Partners, believes MagicCube’s technology is “truly unique” and that the financial services industry has “reached a critical point of both desire and need for its adoption.”

“This technology supports mobile and IoT devices with a platform that is easy to integrate and is not limited by device manufacturers or specific use cases,” he said. “This is unprecedented in the current market.”

Mergelkamp added that MagicCube’s technology is a “killer app” precisely because it is not a traditional “app.”

“It is not tied to a specific hardware platform or ecosystem (like Apple), a particular security specification or protocol, or a specific software solution,” Mergelkamp explained. “MagicCube can deliver its robust security to any software-enabled device, comply with the security requirements of any industry (such as payments or healthcare) now or in the future, and integrate into any company’s existing systems, allowing that company to maintain full ownership and control of its data.”