Cybersecurity is a $4 billion industry in Australia, and that number is expected to rise amid the continued shift towards software and app-based solutions.

Security provider Red Piranha is one company looking to take a slice of the market — both here and abroad — with its proprietary firewall software.

The Perth-based company launched in October last year, and is already booking domestic and international revenue with a growing network of IT service providers and individual companies

Stockhead spoke with Red Piranha’s CEO Adam Bennett, who founded the company after a 20-year career in cybersecurity.

Bennett found some time to discuss the business during a multi-state investor roadshow, with the company looking to raise between $2.5-$4 million to fund the next stage of its expansion.

How it works

So what’s a UTM?

The acronym stands for Unified Threat Management, and it describes the next wave of cybersecurity installations which have the capacity to provide multiple security functions at once.

Competition in the space is now based around that advance in technology, where previous solutions only focused on a specific point of weakness.

“I use the analogy of security for your house – you start with locks on doors and sufficient fencing, then there’s additional measures such as sensor lights and CCTV,” Bennett says.

“Effective home security isn’t due to just one of these things alone, it’s all the elements working together. And cyber security is similar – you need multiple functions working simultaneously to create an effective security framework.”

Red Piranha’s core product is its Crystal Eye UTM, an advanced firewall which it says offers rapid improvements in detection and response times — the two most critical functions to warding off cyber threats.

The technology effectively acts as a series of filters against suspicious malware, starting with gateway antivirus monitoring through to data loss protection and content security.

Crystal Eye can be deployed across both the cloud and specific hardware devices, with scalability for internet speeds up to 80 gigabytes per second.

Market opportunities

Red Piranha’s revenue platform is based on a subscription model. Customers sign up for an initial three-year term, with the option of additional services at extra cost.

And with the continued growth of software-as-a-service (SaaS) and app-based solutions, Bennett expects more small-to-medium enterprises (SMEs) will continue to grasp the importance of cybersecurity to their business.

Bennett says the product was developed out of a sense of “frustration”, given how many SMEs in the Australian market were either untrained in or unable to afford the necessary cybersecurity platforms.

There are more than three million SMEs in Australia and around a quarter of those are projected to be using UTM products by 2022.

But it’s the international market where Red Piranha is eyeing off bigger opportunities. The company has received inquiries and signed memorandums of understanding across Europe and South-East Asia.

Indonesian company Professtama has signed on to buy 1,200 Crystal Eye units over the next two years in a $2 million deal. Red Piranha’s current sales mix is comprised of only 35 per cent domestic customers, with the remaining 65 per cent from overseas customers.

The company forecasts full-year revenue to increase to $5-6m in the June 2020 financial year, up from just over $500k in its first eight months of operation.

The investor pitch

Given that sales profile, Red Piranha is looking to raise money from investors to execute on the next phase of its international expansion strategy, with a view to a potential ASX listing.

“The funds will allow us to develop those international networks, without having to divert resources from the Australian market,” Bennett told Stockhead.

The company is looking to raise at least $2.5m by issuing 14 million shares at 18 cents, which values the company at 16.6 million. The pre-IPO round is on offer to sophisticated 708 investors, with the option to increase the offer by 8 million shares for a maximum raise of $3.96m.

“We’re aiming for between $2.5 to $4 million, and we’ve got nearly $2 million of that already,” Bennett said.

The current funding round closes on April 19 and is being managed by Canary Capital. The company has tabled plans to list on the ASX in the March quarter of 2020.

Around 32 per cent of the funds raised will go towards sales and marketing. 24 per cent of the total has been flagged for admin costs, with around 16 per cent allocated to engineering development.