Cyber force: Field Effect lands US$30M to fortify SMEs’ IT defences

Cybersecurity stock photo

Much like the cybersecurity software his firm specializes in, Matt Holland does his job quietly and discreetly, with little fanfare.

The co-founder and chief executive of Ottawa-based Field Effect Software would be the first to tell you that self-promotion isn’t his strong suit. The same may be said of his company – but that could soon change dramatically.

The fast-rising startup Holland launched with business partner Andrew Loschmann six years ago is hoping to raise its profile in a big way after raising a US$30-million funding round led by New Jersey-based private equity firm Edison Partners.

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Holland and his team are looking to lean on Edison’s sales and marketing connections south of the border to help Field Effect crack a market it has yet to really penetrate.

“We’re keen to grow, so we definitely need to grow out the bold aspect of the company and what we’re doing,” Holland told OBJ on Tuesday. 

“Everybody is trying to be the cool next cybersecurity company. But we bring value, we bring trust, we bring good relationships, and, at the end of the day, that’s what has resonated with our customers.”

It’s the first outside funding for the Glebe-headquartered firm, whose mission is to protect small and medium-sized businesses against an escalating barrage of ransomware attacks and other cyber crimes. 

Easy-to-understand tech

Field Effect’s flagship product, a software platform dubbed Covalence, uses analytics and machine learning to detect and neutralize cyberattacks. Its proprietary system alerts customers to potential threats and issues regular reports on suspicious activity in a “readable format” that’s designed for anyone – even the most IT-challenged manager – to understand.

It’s a value proposition that’s resonating with more and more SMEs as the volume of cyberattacks grows. Holland said most big-name cybersecurity companies ignore smaller enterprises in favour of higher-margin deals with big fish like Fortune 500 firms, leaving SMEs starved for easy-to-use, affordable and comprehensive protection that monitors a wide range of devices.

“Not every company can afford an IT team,” noted Holland, who started his career as a cyberespionage expert at the Communications Security Establishment, the agency that protects the federal government’s IT and communications networks from outside threats. 

“Not every company can afford an IT team. I think ultimately that has made Covalence a much more widely appealing solution for SMEs.”

“I think ultimately that has made Covalence a much more widely appealing solution for SMEs.”

Field Effect’s client list, which includes the Ottawa Sports and Entertainment Group and accounting firm Welch LLP, now numbers in the hundreds. And once it gains a customer, Field Effect almost always keeps it – the firm has lost just one client in the last five years.

TryCycle Data Systems vice-president of technology Geoff Schaadt, whose Ottawa-based health-tech enterprise has subscribed to Covalence for a couple of years, described the platform as “shockingly easy” to use. 

“Everybody has security issues, but because we deal with medical data, ours are especially of concern,” said Schaadt, noting the software saves the 24-person startup the cost of paying a full-time IT employee to keep an eye on its networks and devices.

“It’s watching for all the things that normally a person would have to do remote monitoring with. We don’t have to fuss with it.”

Field Effect now has 175 employees, up from fewer than 40 two years ago. Its revenues, which have been growing at a steady annual clip of about 75 per cent year-over-year, are now in the ballpark of US$20 million and rising. 

Focus on R&D

Holland spun Field Effect out of his first cybersecurity venture, Linchpin Labs, which he sold to defence giant L3Harris Technologies in 2018 for a reported US$200 million. 

That gave Holland and his business partners the financial wherewithal to hone Field Effect’s software before pushing it out on a large scale, and customers quickly responded. Since then, the firm has inked deals with sales partners like Harris Computer and opened offices in the U.S., Australia and the U.K.

But so far, Field Effect has channelled most of its money and resources into developing its products – which also include a platform called Cyber Range that trains employees how to recognize and respond to online security threats – rather than selling them. 

The firm spends a meagre 10 per cent of its revenues on marketing, while half of its workforce is devoted to R&D. Field Effect earns about 70 per cent of its sales from Canadian customers, with U.S. clients accounting for 25 per cent and U.K. buyers most of the rest. 

That’s a ratio Holland is eager to change.

“The typical (revenue) split (for cybersecurity companies) is 90 per cent U.S., 10 per cent Canadian, so just getting to industry-standard ratios would represent a massive amount of growth for us,” he said.

Edison general partner Lenard Marcus, who is joining Field Effect’s board of directors and will advise the firm on go-to-market tactics and strategies, noted that existing customers rave about the firm’s technology. Now, he said, it’s time for the company to take that message to the world.

“This is a really good market that has no clear market leader, so it’s a great opportunity for Field Effect,” he said. 

For his part, Holland said the firm’s new investment partner “definitely got Field Effect and its mission very quickly.” 

Buoyed by Edison’s marketing muscle and financial heft, the Ottawa company is aiming to hire another two dozen employees before the year is out as it ramps up its bid to capture a bigger share of a growing global market.

“We’re pretty excited to see what (Edison) can bring to the table,” Holland said. “We’ve really built a road map that, if we execute on it, will mean very, very big things for this company.”

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