Opinion: CEO goes from Fortune 100 firm to security startup

When OBJ last checked in with Steve Edgett, the 2010 Forty Under 40 recipient was receiving accolades for his achievements as vice-president at EMS Technologies Canada.

Fast-forward four years, and Mr. Edgett – now aged 42 – is involved with another firm in the defence and security sector, this time a startup named Knowmadics. It’s focused on collecting data from cameras, unmanned aerial vehicles and other remote surveillance systems and then turning it into useful information.

Sounds abstract? Here’s an example. Mr. Edgett was able to pre-sell its system to a large petro company in a NAFTA partner country after demonstrating that real-time information from surveillance cameras could effectively stop what is known in the oil industry as “milking” the pipelines.

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This customer was losing $2 billion a year to thieves, likely assisted by a dishonest employee or two, who tapped pipelines and siphoned off oil for sale on the black market. Knowmadics expects its system to provide a return on investment within three months of implementation.

Paul Maguire, previously a U.S. navy intel guy and president of Ultra Electronics and Autometric, is CEO and co-founder of Knowmadics. He says this about Mr. Edgett:

“Steve ended up being a godsend for us in that he was becoming available just as we were looking for someone to manage our Canadian, Halifax and Ottawa opportunities. We wanted someone who would be comfortable operating remotely (the company is headquartered in Chantilly, Va.) and growing a plan from $0. We also wanted someone who had an international business development background. Steve ticked both of those boxes and got us our initial sales, six months ahead of schedule.”

Mr. Edgett earned his stripes spending years in defence posts, first modernizing search and rescue (SAR) information systems for the Canadian military straight out of university. He took the firm from grease pencils and flip charts to a world-class system called SAR Master. The armed forces decided to market this worldwide on a cost-recovery basis, but it wasn’t long before they realized that they should not be in business. So Mr. Edgett licensed the intellectual property, giving the federal government perpetual rights to it, and went out on his own. His first customer? The United States Air Force.

“If you can get a contract with the USAF and get paid for it, you’ve just won the lottery,” Mr. Edgett says. “Getting such an enormous bureaucracy to approve anything, including paying an invoice, is very complex.”

At that time, EMS was his main competition. Like many large firms, it was cheaper for EMS to buy Mr. Edgett’s company and bring him on board than build the technology itself. EMS paid $2 million for the firm, two times its revenue in December 2000. Mr. Edgett’s timing was fantastic as three months later the dot-bomb crisis hit and tech valuations crashed.

After that, Mr. Edgett found himself building a sensor network in Iraq and Afghanistan, one which tracked soldiers in harm’s way. It was part of their duty of care to help personnel in places where there was no help. Mr. Edgett built Personnel Recovery Co-ordination Centres (PRCCs), which had to collect, analyze and transmit data after being alerted by small, secret tracking devices military members were wearing (activated by isolated U.S. or Canadian military personnel) that they were in trouble.

“We saved more people in our first two years than all other technology combined,” Mr Edgett says. “After an isolating event, you have maybe 60 minutes to spin up special ops personnel or that guy is probably lost. That’s what we did with our PRCCs.”

Asked if he was ever in danger, he says, “In 2005 in Iraq, I was woken up at 3 a.m. when the windows of my trailer were blown out by an RPG. But, frankly, this was routine.”

EMS was eventually bought by Honeywell, which is a Fortune 100 company for a reason. It is incredibly process-driven, which suits an enormous business but not necessarily Mr. Edgett. “EMS got Honeywell-ized,” is how he puts it.

“Our division alone (automated control systems) had 75,000 people and $17 billion in revenues. That’s just a division. Getting anything innovative approved or even getting Honeywell to invest in our product was next to impossible. They wanted to milk the technology for cash flow, not growth. In fact, the only innovation I could see going on was either in finance or acquisitions and neither interested me much.”

So Mr. Edgett left the low-risk-tolerance culture of Honeywell to join Paul Maguire and Claire Ostrum, right after they had raised $2 million to start Knowmadics.

“The idea behind the company is pretty simple and our slavish adherence to a lean start enabled us to stay relatively focused during our formative months when a lot of companies flounder trying to chase everything they see,” Mr. Maguire says.

These guys get the idea that the three most important things for every startup are sales, sales, sales.

Technology-wise, Knowmadics is not that much removed from its competition. But the philosophy is different. Knowmadics is based on an open architecture rather than proprietary systems.

“Governments and businesses are fed up with proprietary systems and tied selling,” Mr. Edgett says.

Asked where he thinks Knowmadics will be in five years, he answers, “$50 million per year in revenues and active in Kuwait, Abu Dhabi, Dubai, Mexico, Nigeria, the U.S. and many other nations, maybe even Canada! We have deals on the table for companies like Royal Dutch Shell, Pemex and a lot of other firms so wherever they operate, you’ll see us too.”

He adds, “Long term, we think Knowmadics can be very big – we see our ecosystem being used to do really new things like creating a platform for, say, crowdsourcing crime-solving. Imagine if all the remote surveillance data together with citizen video of the Boston Marathon bombing was available in real time, not only to law enforcement, but everyone. Could they have found the bombers sooner? It worked in Iraq and should work here.”

Bruce M. Firestone is founder of the Ottawa Senators and a broker at Century 21 Explorer Realty. Follow him on Twitter @ProfBruce.

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