Marmalade Game Studio (mobile games, 41% of FY20 portfolio value, adjusted for Mindtrace)
Summary: Publisher of high-quality digital board games
Marmalade is a mobile games studio, developing and publishing high-quality digital board games as premium multiplayer titles on mobile (and increasingly PC and console titles). Marmalade has seven live titles (including Monopoly, Cluedo, Game of Life), with IP licensed from Hasbro. Marmalade’s titles largely appeal to a Western audience with universal appeal – they are played by young and old, with an even male/female split. Marmalade has offices in London and Lisbon and employs c 53 staff.
Background: Success followed a Bloc-led pivot in 2016
Marmalade used to be known as Ideaworks3D, a developer of a technology suite (SDK) for developing mobile games. Backed by Bloc Ventures, Bruce Beckloff stepped in as interim CEO working with the current management team (Mike Willis, now CEO and Cristina Mereuta, now COO) to affect a turnaround of the business in 2016, pivoting it to a work-for-hire mobile game development model and laying off two-thirds of its staff in the process.
From its smallest point in early 2017 (17 staff), the company grew steadily to 33 employees in early 2019 and 53 staff in July 2020. In the process, the company built on its key relationship with Hasbro, from whom it licences the IP for each of its seven titles. However, the business has really taken off with the launch of Monopoly in November 2019, boosted by the impact of the global lockdown in Q220. Marmalade’s latest title, Game of Life 2, was launched in July 2020. In 2021 Marmalade released a self-published game Jigsaw Video Party, which will launch Marmalade’s video multi-play in-house platform being developed in cooperation with video conferencing and media platforms. Multi-play will then be rolled out across the portfolio of games.
Addressable market: Effectively unlimited
Mobile games is a US$77bn global market, growing at 13.3% y-o-y (Newzoo), but increasingly moving away from premium titles towards free-to-play (FTP) titles led by gamers in the Far East (China, Japan, Korea). With six billion smartphones and over 2.5 billion gamers worldwide, Marmalade’s market share only scratches the surface of the potential addressable market. Apple Arcade, launched in 2019, has helped stem the inevitable trend towards FTP, releasing high quality mobile titles to iPhone users as part of a £4.99 monthly subscription. Marmalade finds most of its subscribers (typically c 70%) are on Apple rather than Android devices.
Business model: Lucrative, even after platform and licence fees
Marmalade’s titles are sold via intermediaries (eg Apple, Android, Steam, console), all of whom tend to take a 30% revenue share. They are also based on licensed IP, which improves discoverability and reduces the need for direct marketing, with net revenues split between Hasbro and Marmalade after development and marketing costs. We estimate that Marmalade receives 50%+ of the headline sales price. Marmalade’s games cost up to £1m to create (launch title plus subsequent downloadable content) and are typically sold at a £2–5 price point on mobile, £15 on Steam and £20 on Switch (console). The advantage of the digital model is that marketing can be turned on and off depending on data-driven ROI analysis. As well as up-front sales, Marmalade also derives 30–50% of total revenues from in-app purchases and offers a ‘season pass’ at £35 that allows the subscriber unlimited access to all content for life for a given game (c 6% of subscribers to a title convert to the season pass).
COVID-19: Boom time – 279% y-o-y growth in revenues in FY20
Simply put, Marmalade has benefited significantly from the global lockdown in 2020, with gamers reaching for the family-friendly social and multiplayer mobile titles that Marmalade develops. As a digital publisher with seven titles on sale, including Monopoly only recent launched, Marmalade was well placed to benefit from surging demand.
Management: Experienced games developers
The core management team, Mike Willis, CEO, and Cristina Mereuta, COO, are experienced games developers who joined Marmalade after working for the AAA games publisher, Electronic Arts. They took over responsibility for the studio as part of the turnaround in 2016.
Strategy: Strengthening relationship with Hasbro, growing into new licensors
The studio has grown substantially through its relationship with Hasbro, which continues to strengthen. However, as Marmalade has grown with the launch of new products, the next step in its evolution has been to diversify the business, with franchise launches from two new IP licensors expected in 2021, together with a self-published title, Jigsaw Video Party, being launched on Marmalade’s own multi-player platform. The company will increasingly look to add new licensors in the future. The team has substantial prior experience developing its own IP.
Bloc value-add: A committed and supportive investor
Having stood by Marmalade and supported the new management team to pivot the business in 2016, Bloc has managed to pull off the balancing act required of a good investor. It has in turn provided the necessary finance, acted as CEO in the early days and then given management the space to execute on its strategy. Although Bloc is not a games sector specialist, Bloc has invested in a games development platform, supported its pivot and is now looking to sell a successful mobile games studio in a strong M&A market.
YellowDog (multi-cloud computing, 13% of PV)
Summary: Hybrid- and multi-cloud workload management platform
Through virtually aggregating millions of high-performance compute cores in the cloud, YellowDog provides a workload management platform for resource-intensive cloud computing that can be deployed to: 1) manage cloud costs and improve cloud performance; 2) improve cloud resilience and minimise reliance on a single provider); and 3) use in network distributed cloud computing to provide an on-demand high performance computing (HPC) solution for complex tasks. Although initial revenues were derived almost exclusively from rendering of computer-generated imagery (CGI), YellowDog has significant potential in pharmaceutical drug discovery (where it has held successful trials), for new chip design in the semiconductors sector, as well as the finance and insurance sectors. YellowDog has also invested in the YellowDog Index to provide real-time insight to global cloud/server capacity, pricing, and environmental impact – a first-of-a-kind offering.
Background: Multiple use cases catching the eye of the hyperscalers
YellowDog was founded in Bristol in 2015 by Gareth Williams. It has established its solution in animated movie rendering, a highly compute-intensive market, where contracts are increasingly moving from project-based to framework agreements. However, YellowDog’s technology has applications well beyond just CGI, and its capabilities can be replicated across multiple markets with complex compute requirements. As such, management is looking to diversify into new sectors such as life sciences, meteorology, financial services, and semiconductor design, with proof-cases and active engagements in each of these sectors.
These trials have caught the eye of the ‘hyperscale’ cloud providers (AWS, Azure, Google, IBM, Oracle) and under a new CEO (former CTO) Simon Ponsford, the company is looking to partner with cloud providers to deliver 100k+ virtual core compute engines, making complex compute applications more flexible and cost-effective. Based around these capabilities, the company has built a pipeline of customers which could each generate up to c £2m of ARR.
Technology: Scale, control and optimise cloud computing
YellowDog provides a Platform as a Service (PaaS) offering, together with the free YellowDog Index to support the sales pipeline.
The YellowDog Platform launched in 2019, allows a company to manage resource-intensive and high-performance computing workloads on time and on budget through coordinating multi-cloud access with in-house computer resources. An additional licence allows the use of YellowDog’s “Best Source of Compute”, launched in 2020, to identify the best available computing resources and make smarter infrastructure decisions, based on factors such as availability, cost, performance, latency, regulation, security and sustainability.
In H220, management released the YellowDog Index, a free-to-use visualisation tool that provides an analysis of the different instances offered by the main public cloud providers: Amazon Web Services (AWS), Google Cloud Platform, Microsoft Azure, Oracle Cloud Infrastructure and Alibaba Cloud. Based on the selected inputs, the YellowDog Index organises the data to help companies identify the instances that best match their specifications.
Addressable market: Workload management and cloud orchestration for compute-intensive services, US$2.25bn market by 2025
Businesses are increasingly moving to the cloud, recognising that on-premise computing resources are either constrained or underutilised and the cloud offers a better, more flexible solution. In terms of computing project work, business-critical, compute-hungry processes often overrun, leading to unnecessary costs. For critical services, using a single cloud or region increases the risk of service failure, vendor lock-in, lack of server availability and poor performance. The ability to coordinate unused capacity for compute-intensive work has also created a completely new market, where previously you had to have access to a data centre.
With the prevalence of cloud, management and optimisation of multi-cloud usage remains a highly fragmented market, with the largest single competitor being individual company technology teams, managing resource allocation in-house. Specialist providers include: CloudSphere (application resource management), Rescale (application management and provisioning), Spot.io (cloud automation and optimization) (acquired by NetApp for US$450m) and Turbonomic (app resource management) (acquired by IBM for US$2bn).
Management estimates the total addressable market (TAM) for cloud orchestration for compute-intensive services in 2020 to be c US$1bn, growing to US$2.25bn in 2025.
Business model: Annual concurrently managed processor core fee plus a monthly fee per core hour to burst to higher numbers of cores
Annual pricing starts at US$13 per concurrent processor core and US$0.02 per processor core per hour to burst above annual committed amount.
COVID-19: Sales slowdown drove focus on life sciences
YellowDog has a foothold in the film and animation sector but has also identified opportunities in other sectors including financial services and life sciences. The pandemic has slowed business development activity and sales into new sectors, drawing out the sales cycle. Travel restrictions are an additional drag on new sales activity.
Funding: Series B round in FY22 to fund channel partnerships
The company is working with hyperscale channel partners to drive sales. The company is targeting a Series B round in FY22, potentially raising £5–10m.
AccelerComm (wireless channel coding, 11% of PV)
Summary: High performance decoding for mobile/fibre/satellite comms
Spun out of Southampton University IP and led by an ex-Arm management team, AccelerComm is developing physical layer solutions for use in 4G and 5G mobile, fibre and satellite communication networks. Its IP offers improved signal deciphering for a given signal to noise ratio, delivering ultra-low latency and a 10x increase in cost-price-performance. This offers a significant increase in network sensitivity, effectively doubling network efficiency for a given power level (and therefore price point). AccelerComm operates on a B2B basis and builds software solutions based around its IP. Any business building or operating wireless to network infrastructure, client devices or related test and measurement equipment is a potential customer. The business operates a licence/royalty and software subscription business model for use of its products.
Background: FY19 a breakthrough year
AccelerComm founded in December 2016 with six employees, with Seed funding from IP Group, a listed IP investment vehicle. Bloc Ventures invested in December 2018, when AccelerComm had expanded to 18 employees. Today, AccelerComm has a team of 36 as the business starts to internationalise and expects to grow to 50+ over the next 12 months.
The year 2019 was seminal for AccelerComm in terms of bookings, customer traction, team growth and product development, leading to initial revenues of £1m and a healthy pipeline of opportunities. The company continues to pursue multiple product development growth strategies.
In March 2020, AccelerComm announced it is working closely with Intel (AccelerComm develops LDPC Decoder for Intel’s FlexRAN), as well as having a strong and improving relationship with Xilinx. AccelerComm is initially finding success in enterprise private network and space applications where the performance benefits that it delivers are highly valued. This has led to recent client wins in the US, Japan and Europe.
Technology: Unique architecture
Communication systems (including but not limited to mobile) depend on channel coding (forward error correction) to ensure the data received are the same as the data sent, with transmission errors caused by noise, interference and poor signal strength. To overcome this, the transmitter adds additional information before the data is sent. Then at the receiver end, a sophisticated algorithm decodes the information to recover the original data. In mobile, 3G and 4G use Convolutional and Turbo codes, whereas 5G requires Polar and low-density parity check (LDPC) codes. Without effective channel coding, mobile networks suffer poor capacity and data rates, with reduced coverage and quality of service.
Latency issues cannot be solved by increasing capacity, with channel coding solutions a necessity. Further improvements in channel coding are becoming increasingly difficult, with channel coding already consuming c. 40% of processing load. AccelerComm’s IP is based on a differentiated application specific integrated circuit (ASIC) architecture that offers ultra-low latency, with high efficiency, with the business selling an ‘integration in a day’ solution. 4G latency is typically ~10ms+, 5G offers a reduced latency ~1ms, but this needs to be offered at speeds of 10Gbps. AccelerComm’s IP offers a scalable solution to this network bottleneck, offering reduced latency at high throughput through LDPC, polar and turbo FEC solutions.
Addressable market: One trillion connected devices globally by 2030
AccelerComm is probably the leading independent provider of channel coding technology and is building its IP portfolio to broaden the revenue base. Competitors include the large, vertically integrated network suppliers, including Ericsson, Huawei and Qualcomm, as well as contract service providers. Large network suppliers will generally prefer to buy a market-leading solution than developing niche, highly specialist propositions themselves. 4G made the mobile internet useful but 5G it expected to make it ubiquitous with some forecasting 1 trillion connected devices but 2030. The products that AccelerComm is developing are relevant to them all.
The core management team is ex-Arm, highly familiar with the IP licensing model. As such, the company understands well the power of partnership in driving technology into multiple application domains as well as application specific consulting, customisation and support to help customers integrate’ designs into their products. The company is further motivated to help customers succeed by the royalty element of a licence that is generated once products are deployed.
In the future (five years or more), AccelerComm expects to generate substantial royalty revenue; however, in the short and medium term, revenues are based around licence fees.
COVID-19: Slowdown in business development and recruitment
With the onset of COVID-19, AccelerComm successfully implemented a remote-working policy. However, as with all telecoms companies, the single biggest impact for them has been the cancellation of MWC-2020, which traditionally plays an important role in sales and marketing. AccelerComm has recently recruited its first full time US-based employee and is currently incorporating a US-based subsidiary from which to develop that market. Looking ahead, AccelerComm plans to continue to grow its headcount as it internationalises over the next 12 months.
Geo-politics: China/US trade tensions, watching developments
AccelerComm is addressing a global market, working in partnership with a number of leading hardware suppliers. AccelerComm has no manufacturing capacity and can work independently on designs with both Asian and Western partners.
Future prospects: Series A takes to take AccelerComm to breakeven
In FY20, AccelerComm successfully raised a Series A fundraise to fund investment in the company’s international sales capability and take the business through to break-even in 2021. Alongside Bloc Ventures (£1.5m), existing investors including IP Group invested £1m, with a new VC, IQ Capital (introduced by Bloc), contributing £3m. The round drove a 54% increase in the value of Bloc’s initial £1.5m investment.
Zeetta Networks (software defined networks, 7% of PV)
Summary: Open, vendor-agnostic platform for software-defined networks
Zeetta Networks offers an open networking platform NetOS, based on industry-standard hardware coupled with patented orchestration software that manages, automates and monitors networks end-to-end, while significantly reducing operating costs. NetOS is vendor agnostic. Zeetta sells NetOS to service providers and enterprises who want to drive down networking costs while improving scalability and flexibility. Zeetta also offers patent-protected extensions for virtualisation, automation and network slicing and splicing. Use cases include enterprises, smart venues, smart cities, industry 4.0, transport and logistics and events. Zeetta now has a team of over 30 employees based in its Bristol office and offshore.
Background: Backed by IP Group and Breed Reply, working with DCMS
In 2015, Zeetta Networks was spun out of the High-Performance Networks Group at Bristol University to commercialise the group’s network virtualisation and slicing technology and build its IP portfolio. IP Group and Breed Reply provided initial Seed funding in December 2015, before a second Seed round including Bloc Ventures in July 2017. NetOS was commercially deployed in Bristol City’s Ashton Gate Stadium until the start of the COVID-19 pandemic.
In February 2020, Zeetta was selected to lead a £9m Department of Culture, Media and Sport (DCMS) funded 5G-ENCODE project at the National Composites Centre in Bristol, which will run until March 2022. The consortium comprises ten companies including Telefonica, Siemens, Toshiba, Solvay and Baker Hughes. The project is to explore new business models and value propositions for enterprise private 5G networks in an industrial environment and test new 5G technologies such as network splicing and slicing in a real operating setting. The three use cases being tested are: interactive augmented/virtual reality; asset tracking across multiple sites and locations; and industrial system real-time operations.
In FY20, driven by the impact of COVID-19, Zeetta strengthened its indirect sales channel, targeting specialist network services resellers which has resulted in a growing opportunity pipeline. Early successes include a signed reseller agreement with Stordis. Zeetta has also selected to deploy its technology for a UK local council ’smart city’ project.
Technology: Visualise, Optimise and Automate
NetOS is a patent-protected network control and management platform that provides multi-vendor, multi-technology network visibility, optimisation and automation through a user-friendly user interface. It enables network operators to virtualise their networks, automate operations and expose the network’s capabilities in a way that many competitive solutions do not, particularly in the optical layers of the network – a unique differentiator in a very sizeable market.
The core of NetOS is the capability to merge topologies from different underlying physical network technologies (eg 5G with Wi-Fi) and across different vendors to create a single aggregate topology that represents the entire network domain. The aggregate topology includes end-hosts (eg smartphones, IoT sensors, IT equipment etc) and through correlation of the network layers, NetOS can discover exactly how they are connected to the network, and monitored in real time.
Zeetta sells NetOS as three inter-related products:
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Visualise shows the status of all connected network devices and the associations between them. It shows how the network is configured and proposes ways of how it can be reconfigured to achieve maximum efficiency.
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Optimise manages connectivity in heterogeneous networks across different technologies, vendors and sites. Optimise takes an intent-based ‘service-centric’ view of the network and orchestrates services end-to-end, across all technologies and vendors that make up the underlying physical network.
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Automate enables scheduling and automated implementation of new network services or groups of services on demand. It automates network configuration (70% of network downtime is caused by human error) and delivers customised connectivity to networks with regular or frequent service alterations such as those found in multi-purpose and multi-tenant venues.
Addressable market: Targeting smart venues and Private Cellular Networks for Industry 4.0
The use case for Zeetta’s solutions is strongest where an industry has complex IT and connectivity needs. Zeetta is initially focused on two European and international sectors:
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Smart venues: stadiums, arenas, conference centres that host a mix of events, such as tradeshows and public events including concerts, are increasingly reliant on connectivity to manage crowds, enable retail, provide safety and enable communication. The ability to provide reliable, flexible connectivity for such venues with a complex service mix is essential.
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Private Cellular Networks: companies are increasingly bypassing telcos to create their own private 4G/5G networks, especially useful for industrial applications such as operating robots, tracking assets and driverless vehicles inside factories, which need fast, reliable connections that can perform critical tasks in near real time (ultra-reliable low-latency applications).
Business model: Open network competing against closed vendor solutions
Zeetta Networks offers the leading open solution to network control and optimisation, offering greater flexibility and cost savings than a conventional software-defined network controller. Its USPs are its core network slicing and virtualisation capabilities, coupled with its flexibility and ease of use. In contrast, Zeetta’s principal competitors are broad-based IT vendors who offer some of the same functionality, but over a closed network. Competing solutions include Juniper Networks, Lumina Networks, Netcracker, Blue Planet (Ciena) and Cisco.
COVID-19: Resilient and diversification of new business
From a commercial perspective, many of the venues/hospitality businesses Zeetta was targeting have been closed or minimally operating as a result of COVID-19 lockdowns. Zeetta’s product positioning and project pipeline improved in 2020, but revenues were delayed. The DCMS-funded 5G-ENCODE project has continued, but other commercial projects have been delayed. Zeetta is therefore focused on sales via resellers to accelerate its sales trajectory with FY21 bookings ahead of plan.
Strategy: Focus on resellers to drive sales
NetOS is scalable, with pricing based on the number of devices directly managed by the software. Enterprise fees typically vary between £10,000-100,000 annually. The management team is focusing on a reseller/distributor strategy, working with Stordis to focus on the German enterprise market.
Pharrowtech (fixed wireless access, 7% of PV)
Summary: Fixed wireless internet for home/business broadband
Pharrowtech is a fabless semiconductor designer. It is a Seed stage start-up developing wireless RF (60GHz) sub-systems (transceiver chip, phased-array antennas) targeting the fixed wireless access (FWA) market. Delivery of ultra-fast internet (1Gbps+) to homes and businesses over the last mile is problematic, with legacy telephone copper wires or TV coax cables unable to deliver the speeds now needed and the laying of fibre too slow and expensive to roll-out universally. Pharrowtech believes that fixed wireless internet supported by its chips offers the most attractive complement to fibre globally.
Background: Radio-frequency integrated circuits technology
Pharrowtech was spun-out of IMEC, a world-renowned research and innovation laboratory, which has been working on radio-frequency integrated circuits (RFIC) since 2005. When Pharrowtech was spun out in 2018, it brought with it this RFIC experience as well as the IP and tools developed to handle analogue technology. After its separation from IMEC, Pharrowtech had a five-strong team, four of whom had previously worked at IMEC. The team has now grown to 18 and is expected to be 24-strong by the time of the funding round later in the year.
Technology: RF radio with embedded antenna array
Pharrowtech delivers a radio with an embedded antenna array, providing a low-cost and low-power consumption RFIC in bulk CMOS technology that supports IEEE 802.11ad and IEEE 802.11ay standards. The CMOS semiconductor process is proven, but IMEC had to build the design models, methodologies, and toolset to design the chips and the analogue antenna array. One of Pharrowtech’s core unique selling points (USPs) is this toolset and the company’s ability to manipulate the components to produce an optimal design solution. Demand for 1Gbps+ fibre internet access is driven by high bandwidth consuming services such as streaming (eg Netflix) and other bandwidth-hungry, low-latency applications where uptake is limited by the ability to deploy fibre to the last mile.
Addressable market: Global proposition, Europe and US led
The market for wireless networking solutions is fragmented, with many competing technologies. However, for equipment makers looking for a mmWave transceiver RFIC and an antenna design licence to incorporate in their own hardware, mm-wave phased array knowledge remains limited and Pharrowtech offers a market-leading solution. Pharrowtech’s designs work at or around 60GHz, one of the few areas where spectrum is still available globally, although not at the same frequencies country by country.
In terms of commercial roll out, Pharrowtech’s designs target the US and European markets first, with Japan and Asia next. Although initially targeting the fixed wireless access market, there are potentially multiple use cases for Pharrowtech’s designs in high-density, bandwidth hungry applications. These include virtual and mixed reality (management is in discussions with a leading platform holder), where lag and latency are a major hurdle to the adoption of the technology. Pharrowtech is exploring the use of its chip designs for autonomous transport systems with Panasonic. Other applications might occur for aircraft entertainment systems and for use in providing the connectivity in smart cities. The order and prioritisation of these opportunities will be determined by the commitment of strategic partners, with an estimated time-to-market of 18–24 months.
Business model: Hybrid model including chip sales and licence fees
Pharrowtech is a fabless semiconductor designer, working on a contract basis with Taiwan Semiconductor Manufacturing Company (TSMC) to prototype and manufacture its chip designs. The chips are ‘vanilla technology’ to be sold at US$5–10 per unit, with order sizes in the single/tens of millions for initial orders already received. Pharrowtech expects to receive a small licence fee for the antenna array.
Following prototyping, meaningful revenues expected in FY22
Pharrowtech remains pre-revenue. The first FWA protype chip was sent for production in Q420 and, as per the timetable, is expected to be approved in FY21. It will then be made available to customers with initial orders expected to be received by the end of 2021. Initial design of the chip is underway, with a listed US technology company (that has claimed the majority of the first pre-production run) identified as a lead customer. Meaningful revenues are not expected until 2022. Subsequent additional revenue streams have an estimated time-to-market of 18–24 months.
COVID-19: Operations largely unaffected
Management implemented a work-from-home policy to address the onset of COVID-19, but Pharrowtech has experienced a slowdown in recruitment, with a number of new team members hired via Zoom and still working remotely. The cancellation of MWC-2020 has undoubtedly had an impact on business development; however, the impact has been managed with a number of meetings converted to online. Operationally, with the business in a product development phase, there was little impact on prototype chip production.
Funding: Series A strategic round targeted by H122
In terms of milestones, there are three bases on which to measure progress and development at Pharrowtech: R&D progress; commercial progress, including partnerships and order volumes; and strategic investment into Pharrowtech at an attractive valuation. Pharrowtech closed a €6.2m funding round in June 2019, and has subsequently been awarded approximately €2m in government grants, ahead of a potential strategic round in H122. However, management may consider an earlier bridge round to ensure that the company has made sufficient progress to achieve its target valuation.
Yordex (enterprise spend management, 4% of PV)
Summary: Smart spend management and flexible financial tools
Yordex has developed a suite of B2B financial software that helps decentralised businesses manage company cards, expenses, invoices and budgets with smart approval rules. Yordex targets businesses with 50+ employees and has developed a finance portal with features including budget management, invoice and cash management for spend control and low processing costs. With the backing of this software suite, Yordex provides company credit cards that offer a layer of control to the employer, allowing cards to be securely issued across the breadth of the business. They come with limitations on categories of spending as well as financial caps, but they also integrate with the company’s finance software for automated accounting, payments and expense reconciliation.
Background: Founded in 2017, credit cards launched in Q419
Yordex was founded in 2017 by former Worldpay executives Erik De Kroon and Hardeep Nagi. Bloc invested in its seed round in December 2018, investing £500k for a 16% equity stake, with a matching investment from the British Business Bank’s Future Fund co-investment programme. In 2019, management started marketing the business as a provider of ‘smart charge cards’, supported by Yordex’s software, which is cloud hosted (on AWS), fully modular and scalable. The charge card was launched in October 2019 and Yordex is signing 5–10 new clients per month.
Technology: Cloud-based, modular ‘smart order’ technology suite
To differentiate itself from its card competitors (eg Soldo, Pleo), Yordex has built its proposition on the latest technology stack, developing a modular solution that offers the client flexibility at a low price point. The technology has borrowed the smart order solution from blockchain, where every order contains its own full history. The fact that the logic resides within the data is fundamental to the flexibility of the architecture, meaning that data can be interpreted and processed accurately in multiple ways. The platform is AWS hosted and every element is scalable.
Addressable market: UK-led roll out to decentralised businesses
Yordex is targeting the UK market first and, once it has established a position in the UK market, management will consider expanding to the US and Europe. Yordex has seen particular demand from benefits-related companies (charities, universities offering bursaries, local authorities), multi-site enterprises (care homes, restaurants, and similar) as well as enterprises seeking to decentralise financial control. Clients include Transport for West Midlands, the University of Oxford, and Allied Care Homes.
Business model: Recurring licence fees and interchange fees split 50/50
Yordex derives revenues from two sources, the monthly recurring licence fee from the client as well as a share of interchange fees for card spending. Interchange fees are fairly standard, with Yordex receiving approximately 1.4% of the 1.7% interchange fee of transactions processed. Pricing starts at £3 per card per month, with client fees tending to fall between £49 and £799 per month depending on the size of the organisation, the numbers of cards issued and the depth of features used. Around six out of 10 clients signed are on the Growth plan (£199 a month) or above. Currently revenue is evenly split between the two sources. Yordex has trialled free cards (a ‘land-grab’ model more popular in the US), but its UK-client base expects to pay for such a service and tends to be put off by a free-to-use model. As Yordex has only recently issued its solution to the market, revenues are building and client stickiness is strong.
Strategy: 80% of the flexibility, modern and easy to use
There are three principal categories of competitor:
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Amex and the high-street banks, which offer standard cards with no controls or ‘smart features’
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The challenger banks/FinTechs, which tend to focus on the consumer first and foremost, although a number are bringing consumer features to the small business and SME market. Revolut is probably the nearest challenger proposition but the closest peers are companies such as Pleo (https://www.pleo.io/) (targeting UK SMEs) and Soldo (https://www.soldo.com/) (European target market), both VC backed. Yordex started as a procurement solution which gives it superior flexibility to these competitors, which started as consumer or small business pre-paid card providers. They typically offer off-the-shelf solutions and although they look modern, they offer little by way of client customisation. Accordingly, Yordex expects to sell at a premium to Soldo/Pleo as it offers greater flexibility and customisation to the SME, whereas Soldo and Pleo offer more standardised product solutions.
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Accounting/ERP software providers such as Xero and SAP, which provide similar workflow integration, although without the integrated credit card proposition. SAP offers a fully customisable solution but looks dated whereas Xero offers a standardised off-the-shelf SaaS solution. Yordex aims to offer 80% of the flexibility of a bespoke accountancy package, while being low cost, looking modern and easy to use for an SME, with the additional benefit of offering smart credit cards.
COVID-19: Recently launched technology, limited impact
Having only recently launched its smart credit card, COVID-19 impacted sales growth. However, the order book and pipeline remain full, with the team capacity constrained rather than demand constrained. Yordex is now ramping ARR to c £1m in early FY22 and growing its sales, marketing, and product teams. Headcount reached 17 at the end of 2020.
Funding: Targeting a Series A raise in early 2022 with ARR of £1m+
Management’s ambitions for FY20 are to add customers at current pricing, with average client size increasing. Yordex is actively looking to grow its sales team, with a full order book and adding 15–20 clients per month. Management is targeting a Series A round in 2022, but has elected to complete a smaller pre-Series-A round first, with Bloc Ventures contributing £0.5m matched by EIS investors. The funding will extend the company’s cash runway, allowing it to achieve £1m in ARR before launching a £5m Series A round. The company is in discussion with several VCs, many of whom have expressed interest in investing once the ARR milestone is reached.
Crypta Labs (quantum encryption, 4% of PV)
Summary: Post quantum computing encryption on a chip
Crypta Labs develops encryption technology and IP, using the quantum properties of light, to secure critical data and communications for the future. Crypta Labs is developing a software solution for mobile devices equipped with a camera, as a first step towards the development of a quantum random number generation (QRNG) chip-based module and IP that can be licensed to microchip architecture designers such as Arm. Focus sectors include the IoT, defence, healthcare, autonomous vehicles and mobile technologies.
Crypta Lab’s approach is to apply its quantum technology in both the pre- and post-quantum computing eras. Having solutions that can be deployed in the pre-quantum era allows Crypta Labs to generate working capital to fund its IP roadmap alongside external funding, de-risking the investment proposition in the short-term.
Background: Application use cases from defence to autonomous vehicles
Crypta Labs was founded in 2012, taking the initial idea to Government Communications Headquarters and ultimately receiving funding from Centre for Defence Enterprise. Since then, between 2016 and 2019 Crypta Labs has raised a total of US$4.4m of funding from angel investors, InnovateUK and Bloc Ventures, together with the Future Fund (source: Crunchbase).
In Q419, Crypta Labs successfully participated in two Plugtests, Cooperative Intelligent Transport Systems (C-ITS) industry events where different ecosystem participants test their solutions against defined standards. At both the ETSI Plugtest in France and the CV2X Plugtest in Spain, Crypta Labs demonstrated the effectiveness of their solution in meeting the standard’s requirements (where many other manufacturers failed).
The company is now engaged with all five vehicle testbed sites in the UK. Crypta Labs is also engaged in the EU funded Connected Roads Programme supporting O2 in the Czech Republic. Crypta Labs has developed a hardware security module (HSM) providing a secure, hardware environment for the generation and management of private and public keypairs, coupled with public key infrastructure (PKI) technology, providing software application security for the communication channels and PKI implementation from the vehicle to everything (V2X).
On other projects, Crypta Labs is partnering with a FTSE 100 infrastructure company and recently entered into negotiations for a 10-year contract to provide a 5G-based intelligent transport system security service for Midlands Future Mobility project, a new testbed being created for connected and automated mobility technology development.
The latest investment round allowed Crypta Labs to further develop its QRNG IP portfolio and to develop the first quantum-enabled HSM (QHSM), helping critical infrastructure to remain secure, as well as to accelerate the roadmap towards a single-chip QRNG.
Technology: Patent-protected IP building towards a QRNG encryption chip
In a post-quantum-computing era, algorithm-based solutions (pseudorandom RNG) can be reverse engineered and deciphered and hardware-based propositions (true RNG) can be tampered with and defeated. Hence, Crypta Labs is developing a QRNG solution to deliver true random numbers and future-proof security.
Crypta Labs’ approach allows for fast generation of random numbers, working at transmission speeds of 1Gbps, scalable to mobile phone security and other IoT applications at a price point of c 10% of competitors’ prices. In testing, Crypta Labs has passed every randomness standard.
Crypta Labs is in an R&D phase, with its first patent granted in December 2019. It has also filed for four additional patents and expects to file for a further two patents in FY21. Crypta Labs has made good progress on the hardware side, having created a QRNG prototype based on a Raspberry Pi 4 platform and integrated it with its hierarchical state machine module, effectively creating their first-generation QHSM product. The company now needs to miniaturise this initial prototype to create a chip-based module and IP that can be licensed to microchip architecture designers such as Arm.
Crypta Labs is developing both a hardware and software solution:
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The software solution is for mobile devices equipped with a camera. Mobile device cameras have now matured to the stage that the lens can be used to capture the random photon reception of light. Using this as the source of its encryption, Crypta Labs is developing an API and SDK to be used by app developers, with initial use cases in finance, healthcare and the IoT.
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The hardware solution is a QRNG encryption chip. A single photon is an elementary particle of light, a ‘quantum’ that acts in a totally random way and it cannot be predicted where on a receptor a photon will arrive. By combining a light source, a detector and a processor into a single ASIC chip, in combination with its software, Crypta Labs can deliver military-grade encryption for any communication device.
Addressable market: Automotive cellular gateway market worth €0.9bn
Crypta Labs is initially targeting the automotive and related infrastructure sector to be followed by satellite and critical infrastructure communications. From Crypta Labs’ own research, QRNG’s share of the RNG market will increase from 15% in 2019 to 50% in 2022. Crypta Labs is one of c 200 lab-based QRNG solutions. Management expects the encryption segment of the cybersecurity market to be worth c €14.6bn in 2024, with a TAM for RNG of €12.7bn and a SAM for critical cellular gateways of €7.8bn. Management estimates the automotive segment of the cellular gateway sector to be worth €0.9bn.
Business model: IP licence fees plus unit-based royalties
Crypta Labs envisages an IP licensing model where the TopCo owns the IP, with a series of sector-focused subsidiaries responsible for business development and sales. As the product proposition matures in a given sector, the subsidiary may be sold with royalties continuing to be received by the group. Focusing on the automotive sector, Crypta Labs is developing a chip-based solution that can be delivered at a relatively low cost (c €100 per unit) while allowing transmission speeds of 1Gbps and above. The company has engaged in extensive testing with UK-based car platforms as well as working with O2 for the CITS trial in the Czech Republic. Other sectors (eg aerospace, satellite, IoT, critical infrastructure) are expected to follow.
COVID-19: Project delays affecting cash runway
The lack of customer traction in terms of proof-of-concept validation in 2020 is disappointing, although arguably COVID-19 similarly impacted all C-ITS project work across the UK and Europe. Progress for the C-ITS trial in the Czech Republic, as well as for other projects, is likely to be slow until travel restrictions ease. Management is prudently managing cash reserves to extend the cash runway.
Funding: Pre-Series A bridge round until revenues achieved
Crypta Labs is seeking to raise a bridge round in FY21 to offset lost revenues, which Bloc Ventures will support if a lead investor can be identified. In an upside scenario, this would then lead on to a Series A funding round once initial revenues are achieved (not before 2022). Otherwise, as the only preference shareholder in the business, Bloc’s position is secured against the company’s IP portfolio.
Summary: A digital identity provider for branded products
EVRYTHNG is a cloud-based IoT business intelligence company. The EVRYTHNG Product Cloud platform allows consumer goods companies to gather and apply traceability data for product items end-to-end, from factory to consumer. Brand owners and manufacturers use this data to optimise inventory, combat fraud and illicit trade and to connect with and gather consumer engagement data. The technology is becoming increasingly useful to provide an audit and analytics trail as regulation and ESG measurement requirements increase globally.
Background: Series B extension to take company to break-even in H221
EVRYTHNG was launched in 2012, completed its Series A raise in April 2014 and a Series B in February 2017. The company had raised over US$60m at the completion of its most recent US$10m funding round in October 2020. Investors include Sway Ventures, BHLP, Generation Ventures, Dawn Capital, Atomico, IDC Ventures and Cisco among others. Bloc Ventures made its initial investment in January 2017 and owns 2% of the equity. The company expects to break-even in H221.
Technology: A land grab for global product data management
EVRYTHNG is part of a US$15bn+ consumer insights and supply chain intelligence market, with some four trillion products sold every year by over two million manufacturers. The company has developed a strong presence in the premium apparel sector, accounting for c 10% of the market opportunity value of US$1.5bn. With end-user demand in apparel hit hard by COVID-19 in 2020, EVRYTHNG focused on expanding its other verticals, including beauty, packaged goods and food & beverages. There is quite a high level of market concentration, with 60% of consumer product sales originating from 300 brand owners in Europe and the US. By way of example, Ralph Lauren manufactures c 180m products annually across 130 different factories. EVRYTHNG derives c US$1.2m of ARR through a five-year contract, generating 80% gross margins.
COVID-19: Resilient performance, diversification across sectors
EVRYTHNG has a long-term digital recurring revenue model so revenues remained robust and even grew in FY20, with the company continuing to close contracts in FY20 and H121 despite COVID-19. Management shifted focus, extending customer acquisition from apparel to packaged goods, food & beverage, and beauty. Contract wins in H220 highlighted the diversity of the business, including long-term contracts with Levi Strauss (apparel), Reckitt Benckiser (healthcare), Hewlett Packard (technology), MOWI (fresh seafood), ABInBev (beverages) and PUMA (apparel). Apparel began to demonstrate recovery in Q121. Recurring revenues from packaged goods and food & beverages are 50% of the company’s run rate at Q221.
Business model: Platform built, pushing to scale
EVRYTHNG has built a cloud-based platform-as-a-service model, based on open-standards technology (so clients are not locked in), which it is now starting to commercialise. Every new client incrementally adds to that recurring revenue base, paying a fee per product item per year (US$5-10 per 1,000 items). Pricing varies depending on the product price point and committed volumes. QR codes, tags and labels are placed on products by packaging companies, with the data managed by the EVRYTHNG Product Cloud with Google Cloud, Alibaba and AWS. EVRYTHNG provides a suite of application solutions operating on the EVRYTHNG Product Cloud.
Strategy: Limited competition for a deep tech niche
Although the technology is sector agnostic, management refocused the business toward sectors other than apparel in FY20, targeting the packaged goods, food & beverage, and beauty sectors. Management recognises that potential competitors include large, capable, well-funded global groups (eg IBM), but believes that these groups will perceive the market as too niche to warrant direct investment, preferring instead to buy existing market solutions once they are market-proven.
Management looks at five categories of competitor: 1) tag/label & packaging providers (eg TetraPak); 2) serialisation providers (eg Systech, Antares Vision); 3) traceability compliance providers (eg Kezzler, PSQR); 4) supply chain data providers (eg project44, EverStream); and 5) systems integrators who are likely to consider an acquisition over developing their own proposition (eg CapGemini).
Although competitors overlap certain elements of the business, management does not yet see a core competitor trying to replicate what EVRYTHNG is seeking to achieve and sees EVRYTHNG’s end-to-end, item-level data management approach as highly differentiated. Given the time and investment taken to develop EVRYTHNG, the temptation for a larger players is likely to be to buy a defensible, niche technology, rather than to seek to build a direct competitor.
Funding: Growth equity and M&A
EVRYTHNG is targeting break-even by H221 in its organic business plan. With demand for digital identity and traceability accelerating, the company is planning to raise growth equity during H221 to support M&A and accelerate the platform’s roll out. M&A targets are likely to include consumer engagement and authentication solutions and targets in specific verticals and geographies. Acquisitions will increase the ARR run-rate, accelerate the product roadmap, and bring new relationships and customers to EVRYTHNG’s platform.
Paytia (cloud-based payment compliance software, 3% of PV)
Summary: A secure cloud-based telephone payment solution
90% of businesses that take card payments over the phone ask customers to read their card details aloud. Put simply, it is a rule breach if merchants take a credit card number from a consumer by jotting down the number. Paytia offers a cloud-based platform that enables customers (often SMEs) to take telephone credit card payments without breaching PCI (payment card industry) security rules, or GDPR. Card acquirers (banks offering card acceptance services to merchants) and card schemes penalise merchants with higher fees if they do not have a compliant process for receiving telephone payments. Paytia provides such a solution.
Background: Bloc’s investment drives commercial roll-out
Paytia was established in 2016 as a spin-off from a secure voice recording company financed by Vodafone. Its CEO, Curtis Nash, is a serial entrepreneur in telecoms and payments applications who previously founded Cognia, a global communications services company for compliance, risk and productivity, later acquired by Smarch, a US technology company. Paytia was self-funded prior to its seed round in September 2020, when it raised £1m led by Bloc Ventures. The investment has enabled Paytia to significantly scale its commercial and technical teams. Paytia currently employs 14 staff, with a UK-based central team of five staff, together with a development team of nine people based in India.
Technology: cloud-native card not present (CNP) global payment solution
Paytia offers a cloud-native platform (hosted on AWS) that can scale globally, providing businesses with a scalable and affordable means to take card not present (CNP) payments from customers in full compliance with PCI-DSS standards and without breaching increasingly onerous payment and identity regulations. Paytia’s solution is PCI DSS Level 1 certified, a US compliance certification that typically takes at least 3 years to secure. Its technology allows sales staff to take payments over the phone in compliance with regulation, reducing the risk of fraud and fines for non-compliance.
Paytia operates in the UK, India and the USA, providing a link between payment services companies (including partners such as Stripe, aircall, PayPal and worldpay) and telcos, who are offered a share of Paytia’s revenues.
Paytia offers four products:
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Secure Virtual Terminal: enables card payments to be made during customer calls without customers having to disclose their payment card details.
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Automated Payments: an automated solution that enables customers to make card payments over the phone, without the need for a member of staff to be on the call.
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Keyphone: allows payments to be taken securely during customer calls (by dialling 729), without the need for any hardware or a computer. Importantly, the solution does not require a smartphone.
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API: enables contact centres, software vendors, and telecoms and payments services providers to seamlessly embed Paytia’s Secure Virtual Terminal functionality into their core applications to allow secure payment-handling.
Paytia’s solutions can be used on a stand-alone basis or as an integrated add-on to a range of telecoms partners. Whilst leading competitors can take months to deploy an on-premise solution, Paytia is able to deliver its cloud-based solution in less than an hour.
Addressable market: US$750bn in the US alone
Growth in remote commerce has led to a resurgence in voice-based payments, with card transactions estimated to be worth US$750bn in the US alone. As well as the US and the UK, Paytia is also focusing on the opportunity in India, a mobile-enabled market of 42.5m SMEs, although many do not have smartphones.
Business model: cloud-based SaaS model
Paytia’s platform is given to telecoms companies for free, incentivising them to provide access with a cut of the revenues from card transactions completed over their networks as a cloud-based SaaS model. Paytia’s revenue model involves charging the customer a set-up fee and a percentage transaction fee, as well as a monthly subscription fee. Competitors include Eckoh plc (LSE: ECK), PCI Pal (LSE: PCIP) and Semafone, a PE-backed private company
COVID-19: strengthened Paytia’s use-case and accelerated its roll-out
Along with other companies operating SaaS based revenue models, the COVID-19 pandemic has driven take-up of Paytia’s solutions as well as driving increasing volumes of CNP transactions. With a number of its principal competitors only providing on-premise solutions, the pandemic strengthened Paytia’s use-case and accelerated its roll-out.
Future prospects: Series A round in next 12 months
Paytia was pre-revenue when Bloc invested in September 2020, but following Bloc’s investment has subsequently exceeded early revenue expectations, with £6.5m of transactions completed to date. The priorities following the funding round were to launch its products, to sign-up major customers and prove the channel strategy. The company has secured initial trials with a solid pipeline of direct customers and is working with channel partners including a number of major global online payments companies. The company hopes to raise Series A funding in the next 12 months, based on strong growth in ARR. The Series A funding will allow Paytia to scale-up, increase its range of channel partners and support further international expansion.
Bloc value-add: network connectivity and mobile expertise
Paytia’s CEO, Curtis Nash, had known David Leftley from Bloc Ventures for over 10 years, with a personal history going back to David’s role at Vodafone Corporate Ventures. Given this history, Bloc’s evident mobile expertise and network of channel partners, a decision to take funding from Bloc Ventures was the obvious path.
Exit prospects: exit not yet on the radar
Although Paytia is very early in its lifecycle, we would note that Curtis Nash, as a serial entrepreneur, has previously sold a number of businesses to strategic acquirors.
Mindtrace (artificial intelligence, 3% of PV)
Summary: Neuromorphic artificial intelligence (AI)
Mindtrace is one of few companies worldwide developing intelligent machines capable of ‘unsupervised learning’, which is regarded as the next step in the development of AI. Mindtrace is deploying AI capabilities closer to human level intelligence (‘AI Brains’) through the use of unlabelled data, unsupervised few-shot learning, knowledge consolidation and sharing. Mindtrace’s AI solutions enable customers and partners to reduce costs (the biggest cost component of most AI applications in the market today is training the AI) as well as enhance customers’ end-products and services – delivering continuous AI learning of new use cases from unlabelled data using only a few reference examples, and transfers this learnt knowledge across multiple devices. The resulting AI technology can be applied to multiple applications where visual image processing is required, with potential applications including data management, cyber security and the internet of things, however the initial focus is on systems for autonomous vehicles.
Background: Manchester University spin-out, funded by Bloc in Q121
The core concepts that underpin Mindtrace were conceived in 2015 and the business received its first institutional capital investment in 2017 (Mercia, ADV). The current CEO, a successful serial entrepreneur, was appointed in Q419. Bloc invested £1.0m as part of a £2.4m Seed+ round in H121, led by Skylake Capital, with participation from Bloc Ventures and existing investor Mercia Asset Management. Management is targeting a Series A funding round in 2022 if milestones are met. Sir Hossein Yassaie, the former CEO of Imagination Technologies and a serial investor in disruptive technologies, was appointed chairman in 2017, with Professor Steve Furber, the ICL Professor of Computer Engineering at the University of Manchester, also on the board.
Technology: cloud-based, adaptive AI suited to edge learning
Mindtrace has developed a cloud-based (supported by AWS) artificial intelligence software platform, Brain Sense, that enables computers to learn without repetitive instruction, digitising part of a human’s cognitive processing flow. Mindtrace identifies three challenges for enterprises: 1) leveraging the use of unlabelled data to support training of the AI; 2) unsupervised future learning based on the limited datasets available in many scenarios; and 3) static capabilities - adding new scenarios often causes trained AI to lose its learning, however Mindtrace’s IP allows scenarios to be added incrementally with loss of historic learning. The strength of its IP allows Mindtrace to operate successfully based on a 90% reduction in manually labelled data. This can lead to a roll-out time up to 6x shorter than competitors. When new scenarios are added to a dataset, the AI does not need to retrained on the whole dataset. This allows continuous edge learning, with new data capable of being added incrementally as and when data becomes available. Mindtrace’s technology enables a set of new possibilities that minimizes the need for big data and allows for faster learning and more intelligent AI that adapts to changing real life conditions.
Addressable market: initial US$5-20bn market opportunity
Mindtrace is building a commercial pipeline based on its research, both since the company was founded in 2015, as well as on prior research at Manchester University before the company was spun-out. What differentiates Mindtrace is its neuromorphic specific hardware configuration, with a “plug and play” technology that can be integrated with existing customer technologies. The technology uses unlabelled data and can “interpret” that data to apply it to different scenarios.
Management has identified four priority sectors and selected three of these for initial commercial roll-out. The three priority sectors are: Asset/fault inspection; smart devices/IOT; and autonomous vehicles. The fourth segment was mobile, however this segment has been put on hold due to the current political climate, particularly with regards Huawei where the CEO has strong connections. Funding from the latest investment round in Q121 has supported the company’s transition from research to implementation, with the initial commercial roll-out of Mindtrace’s AI commencing in Q221.
Management’s priority for 2021 is to validate Brain Sense within key market verticals, including: retail analytics (fraud detection), asset/utility inspection (power lines) and gait analysis (i.e. human movement). These use cases are all heavily reliant on human supervision and represent a combined market value of US$5-20bn.
Business model: Pre-revenue, working closely with strategic partners
The business is largely pre-revenue, with Bloc’s initial investment coming in January 2021. Bloc’s investment was made to support commercial roll-out as the COVID-19 pandemic starts to recede and restrictions begin to ease, with early sales engagement starting in May 2021. Management envisages signing multi-million pound long-term year contracts with a relatively small number of global clients.
COVID-19: Bloc’s investment to accelerate Mindtrace out of COVID-19
As Mindtrace transitioned from its initial research phase, with commercial sales only starting in Q221 following the close of its Seed+ round, the business was largely insulated from the impact of the COVID-19 pandemic.
Future prospects: Aiming for £1bn+ ARR in the medium-term
In FY21, Mindtrace is looking to sign a small number of deals with strategic leads, delivering low levels of initial revenues primarily from consultancy. Off the back of these initial contracts, the company anticipates a US$7-10m Series A funding round in FY22 (either in the US or UK) to accelerate commercial roll-out, with the number of clients doubling in FY22 and delivering the first material annual recurring revenues (ARR). Thereafter, the company envisages continued growth towards its target of £1bn+ of SaaS revenue in the medium-term.
Bloc value-add: Track record, network and specialist expertise
There were two principal factors that attracted Mindtrace to Bloc Ventures. Mindtrace was already part of Bloc’s network, having an established relationship of trust with Mike Dimelow, through his former role with ADV, which had previously invested in Mindtrace. Mindtrace’s management team was also highly impressed with Bloc’s CIO, David Leftley, who is seen as a visionary, almost better able to articulate their value proposition than Mindtrace itself.
Exit prospects: Too early to be specific
At this early-stage in its lifecycle, Mindtrace is focused on growing the business, and believes that exit opportunities will present themselves as the technology is proven and revenues scale.
Tether Technology (cloud video security, 3% of PV)
Summary: Hybrid-edge and cloud-based CCTV platform
Tether is a UK-based company that operates a cloud platform offering CCTV backup and number plate recognition, with functionality being expanded into device health and integration with third-party services such as alarm monitoring and AV analytics, on a revenue-share model. To detect the cameras, aggregate the video and provide a secure communication route to the Cloud, Tether provides a range of three “Tetherbox” hardware platforms as well as a software only product that can be integrated into other platforms. The ultimate aim is to provide the security application platform (SAP) platform software to integrators who will load it onto third party hardware.
Background: Partnership-based expansion
Tether was founded in 2009 and has attracted customers drawn from sectors including retail finance, housing, education, construction and healthcare among others. Bloc invested in the company as it launched the Tether X platform in November 2017. Since Bloc’s investment, the company has focused on becoming a volume operator, with the majority of Tether’s products delivered through a distribution partner, Mayflex. Tether has also established a tiered partner program with seven gold, five silver, and two OEM channel partners (security installers). The company is looking to build up new partnerships in 2021 to increase distribution across the UK.
The team now totals 13 FTE including a managing director based at Tether’s operations base in Devon, as well as the London HQ.
Technology: Video surveillance-as-a-service (VSaaS)
The Tether platform brings physical security devices into a single visual dashboard, with legacy video cameras, alarms and other surveillance equipment aggregated to the cloud via a secure gateway. The Tetherbox connects to new and established hardware, as well as most legacy physical security equipment. Tether’s platform has been built on many years of software development and is now established in the market, with both UK and international client references.
Tether’s security applications platform allows the client to monitor surveillance equipment on site or remotely, providing notification of potential issues, responding to alarm events and finding critical evidence, as well as producing reports for compliance and audit tracking purposes.
From a client’s perspective, Tetherbox provides ease of access to video recordings, collecting information from all cameras, switches, NVR/DVRs on the system and securely displaying the information on a single dashboard. The system monitors the health of the CCTV system, with remote diagnosis and fault detection and, with recordings backed-up to the cloud, the system enhances the overall security of the client’s network. The remote management typically helps reduce engineer call-outs by at least 40%. The platform is scalable, with new hardware able to be added to the existing network, and reliable, with 99.98% uptime in 2020.
Addressable market: CAGR of 16%, US$5bn VSaaS market in 2025
According to mmreports, the video surveillance market globally was approximately a US$43bn market in 2019, growing at a CAGR of 14.6% to 2027, with video surveillance SaaS market CAGR of 16% 2020-25, growing from US$2.2bn in 2020 to US$4.7bn in 2025.
The market is still dominated by traditional (off-line) legacy systems, served by a series of local and regional surveillance hardware suppliers. Existing market participants tend to be geographically limited but are increasingly offering cloud-based solutions. Tether has developed substantial IP in its product-set, and management estimates that it would take a new competitor 3-5 years to develop a comparable platform, together with a further two years to establish appropriate client references.
Business model: SaaS-led recurring revenue model
Tether has used its existing installed base and routes to market to leverage market share in video cloud storage and analytics, and then upsold its platform to increase both direct and indirect sales. The company charges a one-off activation fee for its hardware and installation, but the majority of its fees come from recurring SaaS revenues, with a revenue share for its distribution partner, Mayflex.
Prices vary significantly depending on customer requirements, with some customers only requiring a 10 day record of video recordings, whilst others require up to six years. Certain customers only need time-lapse recordings, whilst others need 4k video. All footage is stored on European servers, with UK storage as a further option for eg the NHS. Future functionality (eg device health, alarm monitoring and AV analytics) is expected to be charged on a revenue-share model.
COVID-19: Tether’s remote solution benefited from lockdown
As a cloud-based service, COVID-19 underlined the need for SaaS solutions such as Tether’s. Tether’s gateway can be ordered and delivered by Mayflex, and then set-up by one of Tether’s remote engineers without the need to visit the client’s premises. Once set-up, surveillance information is uploaded to the cloud where equipment and video output can be monitored, searched and administered remotely with automated fault-checking minimising the need for on-site engineer call-outs.
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General disclaimer and copyright This report has been commissioned by Bloc Ventures and prepared and issued by Edison, in consideration of a fee payable by Bloc Ventures. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services. Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note. No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors. Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison’s policies on personal dealing and conflicts of interest. Copyright: Copyright 2020 Edison Investment Research Limited (Edison).
Australia Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument. New Zealand The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.
United Kingdom This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document. This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
United States Edison relies upon the "publishers’ exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 1185 Avenue of the Americas 3rd Floor, New York, NY 10036 United States of America |
Sydney +61 (0)2 8249 8342 Level 4, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 1185 Avenue of the Americas 3rd Floor, New York, NY 10036 United States of America |
Sydney +61 (0)2 8249 8342 Level 4, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
|
General disclaimer and copyright This report has been commissioned by Bloc Ventures and prepared and issued by Edison, in consideration of a fee payable by Bloc Ventures. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services. Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note. No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors. Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison’s policies on personal dealing and conflicts of interest. Copyright: Copyright 2020 Edison Investment Research Limited (Edison).
Australia Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument. New Zealand The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.
United Kingdom This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document. This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
United States Edison relies upon the "publishers’ exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 1185 Avenue of the Americas 3rd Floor, New York, NY 10036 United States of America |
Sydney +61 (0)2 8249 8342 Level 4, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
Frankfurt +49 (0)69 78 8076 960 Schumannstrasse 34b 60325 Frankfurt Germany |
London +44 (0)20 3077 5700 280 High Holborn London, WC1V 7EE United Kingdom |
New York +1 646 653 7026 1185 Avenue of the Americas 3rd Floor, New York, NY 10036 United States of America |
Sydney +61 (0)2 8249 8342 Level 4, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
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