To infinity and beyond
Blueprint to grow Securosys by an order of magnitude and more
We often get questions from investors regarding how we can expand, how quickly, and by how much. I think there are a few pre-conceived notions that lead to this query. They see us as this small, little startup that is only represented in Switzerland and are surprised when we tell them that our management team believes that 10x revenue, i.e. $50M, is clearly within our reach within the next 3 years or so. Even revenues of $100–300M seem quite achievable to us. Why are we so confident about that?
Our confidence can be explained by looking at it from different vectors, existing markets, countries, and new markets. One of them is the current global HSM market, which is worth around 1 billion USD ($800M to $1.2B, depending which market research firm you trust). In addition to this, it has been growing by 15–25% per year. This is just the existing legacy market, comprised of HSMs used in Public Key Infrastructure (PKI) systems, encryption, financial transactions, and more. Realistically, it has been quite difficult for us to break into any existing installations. Even breaking into them by offering better replacements for existing products is difficult since customers don’t like to switch equipment. The only times we were able to enter into a replacement cycle was due the many problems customers had with our competitors’ equipment, including the difficulty to set it up properly, the reliability of it, and their lack of trust in it. This means that we have to target new installations and new customers. By capturing 10–20% of the growth in this legacy market, which is growing by more than $150M per year, we will reach our target revenue of $50M very quickly.
Can we achieve that by limiting ourselves to Switzerland? Of course not — we need to sell our products all over the world. Well, maybe not everywhere and not immediately. Let’s look at the facts: So far, we’ve realized more than 80% of our revenue in Switzerland. The (legacy) market for HSMs in Switzerland is worth something over $5M per year. We expect to garner more than 60% of that by next year. Looking at Germany and the EU, we see markets that are magnitudes larger. Germany has a population that is about 10 times larger than Switzerland. Trying not to get overexcited, let’s assume that the HSM market there is only 5 times larger than in Switzerland (pick any reason: lower GDP/person, lower banking density, less concern about security, anything). Then take a look at the population of the whole European Union, which is yet another size up — about 6 times larger than that of Germany. Staying conservative again, we get a legacy HSM market of around $150–200M in the EU.
How do we get the greatest portion possible of the EU’s legacy HSM market? We have to be there! That’s why we just opened a subsidiary in Germany. With a fully owned subsidiary we can tackle marketing and distribution, as well as enable local partners and integrators. Securosys Deutschland GmbH is located in Kaufbeuren, near Munich. From there we aren’t only able to serve Germany: thanks to the European customs union, we can deliver our HSMs to all EU member states without ever needing to bother with customs. This will give us access to a digitally fluent, developed market of over 500 million people.
Germany and the EU are not the only new countries we intend to expand to over the next year. London, along with the rest of England and the UK is waiting. After that, other financial centers are on our target list. We’ve already traveled to the Middle East several times. These countries like to have the best in security equipment, and they have the money to grant their own wish. Once we’ve established ourselves there, it might also make a nice beachhead to tackle India. Our expansion plan continues further to the East. We just visited Singapore for the first time and have already generated strong interest in our products. The country is perfectly situated to serve Southeast Asia. A few hours to the north, Hong Kong is another financial hub we intend to spread to. Besides being a large financial market in itself, it is also nicely situated to serve as a stepping stone to South Korea and Taiwan. Further to the south, Australia has popped up on our radar. If the large project we are currently discussing comes to fruition, setting up shop there would be a no-brainer. Ergo, if you are in any of these markets and want to help Securosys to expand there, please contact me! And, well, if you’re a competitor … brace yourself!
Now you probably want to ask me where the United States are in all this. Having worked and lived there for over 17 years, I am more than aware that this is not a market that can quickly be tackled in an afternoon. It will need the right preparation and setup. In fact, it will probably need as much effort as all the other places combined. In addition to that, expansion to the US also requires a huge amount of money to have a chance at success. Thinking of this, I’m sure our reserve of SET tokens might come in handy, so we’ll keep them available for when we are ready to take that leap. Despite the great effort that it will surely take, the US would double or triple our serviceable and available market (SAM), and hence our revenue, on its own.
Having local representation in all these markets will not just help our HSM box business. It will also yield loads of customers for our Clouds HSM service. Many companies are currently using AWS and Azure, and have to keep their keys on these systems. They want something better, like having their keys separated from their data and kept safely in a different jurisdiction. This is exactly what we will offer them.
There are many more factors to discuss. I skipped stock markets and other financial exchanges, or ‘whales’ as we call them. Although we will work on these, the largest opportunity, as I have written many times before, is not the legacy market. Rather, it is crypto assets and blockchain systems. There is a multitude of opportunities, and ever more are being created every day. By our estimates, the crypto assets market for HSM will be about 2–3 times the size of the legacy HSM market, while for blockchain systems we expect it to be 4–5 times larger.
As with any plan, things will ultimately turn out differently than you expected. This means we have to stay focused and react quickly. We will adjust our plans whenever needed. If a huge opportunity from the US comes knocking, we will take it! The European Union commission, for example, is currently investigating the merger between Thales and Gemalto, our biggest competitors in the legacy markets. They even asked us what we think about it. Honestly, we don’t know what would be more advantageous for us: a combined company or a spin-off of one of their HSM divisions. Either way, the only victims will be their customers, who we are always happy to help out.
The nicest thing for us at Securosys is that we are ready: we have a proven company with a proven team and proven products. We are way beyond the minimum viable product. The markets out there are waiting for us. As Brian Hankey from Daenary’s System said to us during our visit to Singapore: “You’ve only scratched the tip of the iceberg!”
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