After going several quarters starved for sales of its secure data storage technology, Ottawa-based Leonovus is turning heads in the market with its latest blockchain offering.
Last week, the firm closed a bought deal placement of $13.75 million, which comes after a $1.5 million round in September. Meanwhile, the firm has signed proof of concept deals with a big six Canadian bank and a global healthcare data services firm.
That’s a stark contrast to Leonovus’ last six quarters, during which the firm only made a single sale.
When CEO Michael Gaffney took on the role in 2016 in the midst of that streak, the company’s outlook seemed bleak at best.
“At that point in time it was a broken company, to be honest,” Mr. Gaffney tells OBJ. What the company did have, he says, was strong technology developed over eight years and millions in investment.
Mr. Gaffney says his challenge was to package that technology into a clear market offering.
The firm has “absolutely” seen an uptick in attention from potential clients since adding blockchain technology to its solutions, Mr. Gaffney says.
Leonovus provides encrypted data storage solutions, often helping customers with unstructured data move to the cloud. In short, the firm virtualizes and chops up client data, then disperses it across a network including cloud and on-premise solutions.
The new product, Leonovus 3.0, uses blockchain technology, which secures and verifies data on ledgers by concurrently confirming information from a series of computers or nodes. It encrypts the metadata behind these storage solutions, so that if anyone cracks into one of these nodes, they should be unable to piece the rest of the data back together.
Leonovus calls this a “blockchain-hardened” solution that adds an extra layer of security and redundancy, putting the product above industry standards.
“What we tell our customers is, we assume that all of your investments in hardware and security is all going to fail,” Mr. Gaffney says.
“In other words, the bad guys are going to get in, and they’re going to get access to your data. Just make sure that when they get access to your data that they get nothing.”
It’s a market on the rise, according to industry experts. Leonovus notes in its regulatory filings that IBM estimates the unstructured data storage market will grow as much as 80 per cent each year until 2020, as the total digital data in the world grows at a compounded annual rate of 42 per cent over the same period.
This solution is especially attractive to banks, Mr. Gaffney says, who are looking to the promise of blockchain to reduce operating costs. Leonovus offers a centrally-managed ledger that can’t be altered that makes it easier to track transactions and trace them back to their source, he says.
“It means they can automate a number of back-office processes that currently take days to do. They can basically have software do it.”
Leonovus has added a few resellers to its team, including Missouri’s ApexIT and Toronto’s Flexity Solutions.
Mr. Gaffney says he had to go to Bay Street to convince investors that the “broken” Leonovus had gotten the formula right with its latest offering. Having raised more than $15 million in the past few months, he believes he’s set the company up for success.
“I think we’re on the right track now. We’ve taken the pieces that were broken and fixed them.”
The majority of Leonovus’ 12 employees work in Ottawa, where Mr. Gaffney says the firm has been “hiring like mad”; he expects the firm’s headcount to reach 30 very soon.
Leonovus had to close a California outpost a few years ago. While Mr. Gaffney says the firm may add a few Toronto-based employees, most of the growth will be in the Ottawa headquarters.
Mr. Gaffney says Leonovus hopes to build out a development team specifically for blockchain technology in the city, which would be another five to 10 hires. He says it’s important for him to nurture tech talent in the capital, whereas a large number of firms are outsourcing blockchain expertise to locales such as eastern Europe.
“We need to build local blockchain infrastructure here in Ottawa.”