Are you a cybersecurity scaleup founder looking to pitch C5 Capital for investment? Well you’d want to get your IP in order and secure at least one blue chip customer first.
That’s the advice from Daniel Freeman, chief investment director at C5 Capital, a family-backed tech investment fund with offices in London, Bahrain, Luxembourg and Washington.
“From our perspective, the companies that we invest in must be in the areas of cybersecurity, data analytics and cloud computing.
“We look for companies that have developed both strong IP or trade craft as well as having a blue-chip reference customer that is already using the product,” he told Tech City News.
The firm, which takes a pan-European approach, acquired ITC Secure Networking for £24m in November last year and is due to announce the closure of a $100m tech investment fund next month.
“The most important criteria that we have for making an investment in a technology company is that we should not be taking a technology risk,” Freeman added.
The firm, he said, looks out for companies that have a finished product, and one that’s achieving market traction before investing.
Unlike other investment firms, which look to back early-stage startups, Freeman said C5 Capital priorities those that have at least £5m of projected revenue within the next 12 months. This, however, doesn’t mean prospective businesses have to be profitable.
It’s also important to bear in mind that C5 Capital is not looking to buy out management teams. Instead, the firm wants to forge a long-term partnership with leaders in the companies in which they invest. If founders aren’t happy with this, that could be a deal-breaker, Freeman added.
“If there is one thing that’s turned me off transactions, it’s if the management team is not keen on the partnership approach to building the business.
“We are quite an active investor. We take on board roles and we sometimes even work on operations. This can involve anything from helping out with sales to helping a firm improve its technology,” he added, highlighting the team at C5 Capital doesn’t just provide investment but also seeks to offer a combination of security, industry and tech expertise to help its portfolio companies grow.
With estimates predicting the global cybersecurity market is now worth $120bn, it’s hardly surprising the number of companies offering solutions is on the rise.
In fact, cybersecurity has become such an important vertical within the technology industry that even the highest echelons of government are speaking about it. MPs in the UK recently questioned the country’s potential to defend itself against possible attacks and the government recently announced a £1.9bn National Cyber Security Strategy.
For the time being, C5 Capital is focusing on companies that tackle identity security and access management and those that look at insider threat risk and privileged accounts. The investment firm is also interested in companies applying AI and neural networks within the cybersecurity space.
“I tend not to be very keen on encryption companies and if I take an interest in a company of this nature, my selection criteria is very high,” he said.
Freeman believes the encryption industry may eventually lose footing to quantum computing: “Five years from now, we will probably have to dramatically re-think what constitutes secure encryption. People at the forefront of the industry are certainly making changes in that respect.”
Additionally, secure storage is another area of interest to all those at C5 Capital. Freeman said the team was especially interested in finding propositions that would seek to solve the problems faced by CIOs when trying to shift workloads into the cloud.
“Cloud migration is interesting to us,” he said, adding: “Managed security services is a very interesting area.”
Although the cybersecurity space is becoming increasingly contested, Freeman believes there’s an imbalance with regards to supply and demand in the industry.
The issue lies in that large corporates are struggling to attract talent, which makes them much more likely to outsource their cybersecurity solutions, providing a great opportunity for smaller players in the space offering meaningful products.