Ian Stevenson, CEO of Cyan Forensics, is a computer scientist by training, and has spent the last 20 years in and around startups, first building new technology then later commercialising and selling it.
In spring 2015 he was brought in as “Commercial Champion” for a Digital Forensics project at Edinburgh Napier University.
The project, now called Cyan Forensics, helps law enforcement protect the public by massively reducing the time it takes to scan a suspect’s computer for illegal material. They also help police forces and other agencies share the intelligence that drives these searches more openly and frequently.
The project had lots of interested customers and a clear path to market, so the university decided to create a spinout company to commercialise the technology.
We spoke to Ian about the spinout journey.
You mentioned law enforcement as your target market, so do your services have international reach?
Yes, we’re starting out in the UK and we’ve run successful technology trials with both Police Scotland and the National Crime Agency, as well as getting great support from several other forces. Once we’ve proved the concept here, we will move rapidly into Europe and the US where there is already huge co-operation between agencies and the market is in many ways similar.
Is this a large market?
The market for Digital Forensics software is rapidly approaching $5bn, and the law enforcement market for our products in UK, EU and USA exceeds $50m. Digital Forensics services are being overwhelmed by the explosion in digital evidence right now, so although budgets are always tight in law enforcement, this is an area where they are likely to continue investing.
Once we’ve solidly established our technology in law enforcement, we plan on following the example of other forensics companies like Guidance Software and extending our reach into Enterprise and Cyber Security applications – massively increasing our addressable market.
Tell us about the process Cyan Forensics went through as a spin out company.
Our spinout journey started when the research team at Edinburgh Napier University won High Growth Spinout Program funding from Scottish Enterprise. I was brought in as “Commercial Champion” to explore the commercial potential and build a business plan. We used the plan to secure investment from Mercia Fund Management and Scottish Investment Bank, and in parallel with putting the investment deal together we negotiated a technology license from the University. Mercia’s considerable experience of spinouts was very helpful in that process, both to us and the University.
The whole deal came together on 6th Oct 2016, and at that point we quickly moved into an office amongst other startups in CodeBase, and Bruce Ramsay who was part of the research team moved out of the University and into the Company as CTO. We have now hired two additional staff and are working to develop the technology demonstrator from the University into our first product.
So what is the timeline for having a marketable product, and can you get this to market based on the funds and staff you have in place?
We expect to put the product into the hands of lead customers for testing in Q2 2017, and clearly this is an area where the product needs to be thoroughly validated before it is used operationally. We expect our first revenue in Q3, and we have funding and the team to deliver that. We plan to raise more money in Q4 next year, which will fund building the team to rapidly sell and deliver our tools across the UK and Europe.
What will that process of trying to find more money look like? i.e. how will you go about it?
One of the reasons we are delighted to have Mercia investing in our seed round is that they have the ability to support our growth from their own funds. We’re still expanding our network of investors through events like TechCrunch Disrupt in London and Engage Invest Exploit in Edinburgh to make sure we have contacts lined up when we start to raise the next round.
The firm seems well established in Edinburgh. Is the city able to support your growth projections with regard to recruitment etc?
We’ve done very well with recruiting so far, thanks in part to great Universities here feeding entry level positions. Edinburgh is a desirable location for staff at all levels, both as a city and because of its vibrant technology cluster. In the coming years we’ll open other offices to provide more local support and sales, but I can’t see the heart of the company and especially the technology development side moving out of Edinburgh.
What do you think about the general health of the Scottish high growth tech scene?
We’ve gone from virtually nothing 20 years ago when I had my first job in a spinout in Edinburgh, to a really vibrant community with very high profile successes. What we’ve achieved here is incredible, and I think the next logical steps are in developing outward and making sure that we take full advantage of being part of the UK and EU (for now). While we are a thoroughly Scottish company, Cyan Forensics has raised its funding outside of Scotland and we’re already working with potential customers outside Scotland.
Last year we were the only Scottish company at the UK’s biggest startup event, TechCrunch Disrupt in London, and we got a really positive response. This year we took four other companies with us in a Scottish Pavilion, and next year I’d like to see an even bigger presence – telling our story and bringing in external investment.
Which organisations have you found useful in your journey?
Scottish Enterprise has been hugely supportive, which I think is a huge advantage for Scottish companies. As I mentioned, Edinburgh has a number of great universities which are a wonderful source of IP and people, and CodeBase has a great community which helps us learn from the experience of others. The iconic status of the city and the success of companies like FanDuel and SkyScanner make it easy to convince people that Edinburgh is a good city to invest in. We have had great support from Informatics Ventures in reaching a wider investor audience, and both Informatics Ventures and StartEdin are doing a great job of communicating the story of the Edinburgh tech scene to the outside world.
What challenges have you faced?
Continuity of funding is always a major challenge, especially in transferring technology out of a University.
Research and commercialisation grants tend to be for a fixed period, and application processes often mean that the results of one funding stream must be available before applying for the next. Funding processes (both for investment and grants) often have durations that are determined by multi-party negotiations, complex diligence, and deadlines relating to external factors (e.g. tax years or funding cycles). Thanks to a lot of flexibility from the team, the University, Scottish Enterprise and Mercia we got it all to come together, but there were times when it was hard to see how we would fill the gaps.
What one piece of advice would you give to someone thinking about a tech startup?
I think it’s a hugely rewarding, fascinating and fun thing to do. It’s a life choice rather than a job though, it is all consuming, and you have to go into it with enough optimism to override the knowledge that most tech startups fail (statistical fact). It’s something you have to be sure about and committed to.