Security VAR Intellect Security is spinning out its encryption platform as a vendor in its own right, after securing £500,000 in seed funding.
The Symantec PGP partner will plough the VC lolly into building a channel, sales and marketing resource and support infrastructure for Cryptosoft, which is designed to simplify the deployment of PGP's software development toolkit to the corporate enterprise.
Intellect and Cryptosoft chief executive Jon Penney said the move was necessary to build maximum value for an intended exit in 2016.
"Most owner-managers of VARs our size will have an eye on an exit," he said. "The typical VAR is looking to attract one to two times gross margin. If you have a piece of intellectual property in the mix, in the right part of the market, you could be looking at more like six to 10 times gross margin. The risks are higher but the rewards are equally high."
Henley-based Intellect hired two software developers to create the tool five years ago after identifying a gap in the offerings of the major encryption vendors.
"What would have taken six months with a software development toolkit, we can now do in a day," he said.
"Initially, it was a value-add to our business that gave us an edge in an increasingly competitive security market," he added. "Now we are going a step further and creating a full-blown vendor ourselves that can stand up on its own."
Although Intellect will be Cryptosoft's first reseller, Penney (pictured) said further resellers will be sought to take the technology to market next year. He denied potential partners would be reluctant to take on a technology developed by a competitor.
"We are adding significant value to Symantec and McAfee's core encryption technologies, so if they are already selling McAfee and Symantec, they are going to be interested in how we can differentiate them from their mainstream competitors," he explained.
"Our ideal channel partner would look and feel a lot like Intellect – a specialist niche security partner who is an inch wide and a mile deep. Someone who carries 100 vendors probably won't be able to add value to this."
Splitting off Cryptosoft into a separate company would not only reduce channel conflict but also maximise its value in the eyes of potential suitors, Penney said. "We have our minds very closely set on potential acquirers in three years' time," he added. "What they will expect to see at point of acquisition is dedicated resource and infrastructure, not it being mingled into our [reseller] business."
Cris Pikes, chief executive of security reseller Sysec, who also heads up illicit image analysis vendor Image Analyzer, warned that the transition from reseller to vendor is not easy. His ultimate goal is to sell Image Analyzer, whose technology is harnessed by 43 OEM partners including McAfee and Websense, to a technology platform owner.
"Do not underestimate what is involved," he said. "You need development resources, a strong management team, product engineering and road map guys – which many resellers do not have – and a corporate development guy to raise funds."
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