VENTURE CAPITAL &

PRIVATE EQUITY
Academic Year: 2019/20

STUDENT ID: 20150713

 1. EXECUTIVE SUMMARY

Becrypt is a London-based cybersecurity company with 20 years of expertise in data and

endpoint protection solutions. Their technology meets the demand of the most security-

conscious organizations: UK Government, Ministry of Defence, UK Police, etc., helping these

organizations deliver cost-effective security compliance, especially as they transition to cloud

computing, allow remote working or apply Bring Your Own Device (BYOD) policy. We

identify Becrypt as a great buyout opportunity because of its high-quality offerings, strong

management team, a booming market fuelled by the shift to remote working and cloud

computing. The company is also ideal for MBO due to its high debt capacity since it currently

remains debt-free.

2. COMPANY OVERVIEW

Becrypt provides both public and private sectors with a wide range of Government-certified

solutions to protect data at-rest and in-use across different platforms: desktops, laptops, tablets,

smartphones, etc. that run on Window, iOS and Android 1 . Founded in 2001, Becrypt got

funding from seed investors, management team and support from Chesapeake Innovation

Centre, a US incubator sponsored by National Security Agency2. Becrypt also benefits from its

collaboration with National Cyber Security Centre (NCSC) in R&D which supports it in

research funding and expertise.

3. RECENT PERFORMANCE AND LIKELIHOOD FOR SALE

Since establishment, Becrypt had positioned as a leading supplier of encryption technology to

UK government and high-assurance public sector. It brought them success during 2007-2010,

1
Penney (2016)
2
AccountingWEB (2005)
but as the segment became more competitive, Becrypt saw negative profits (between 2011-

2013). Since 2016, they have focused on researching and developing new products. Paradox

and MDM+, some of their newer offerings, are driving Becrypt’s profitability recently.

Turnover and Profit during period 2013-19

10 200.0%

8 100.0%

6 0.0%
million £

4 -100.0%

2 -200.0%

0 -300.0%
2013 2014 2015 2016 2017 2018 2019
-2 -400.0%

Turnover Profit Turnover growth PAT growth

Becrypt had positive profit after tax (PAT) in three recent consecutive years. 2019’s turnover

grew by 18.3%, while PAT experienced 110% increase during the same year. The success lies

in newer offerings with 2019’s value of £2.49 million, more than double 2018’s figure3. During

2019, Becrypt has successfully cross-sold Paradox to existing government contract, won the

first license sales of MDM+ and first customer for their Managed End User Device, which is

evidence of Becrypt’s ability to commercialize newer products.

Sales by category of 2019

2019

2018

Paradox, MDM+, Software Engineering and Managed End User Device

Disk Encryption Software
3rd Party Hardware Sale

3
See Appendix 1 for the Income Statement
The chance for current management to buy out Becrypt with our help is high. Firstly, current

management needs external funds to build on early successes of newer offerings, as they

mentioned in 2019’s financial account4. Moreover, because cybersecurity is expected to grow

fast due to COVID-19, Becrypt is likely to raise additional funds to move fast to capture new

demand. Secondly, most of non-management shareholders are former directors and employees

that invested in Becrypt from early days. Our offer for their shares is attractive enough for them

to exit, given the growth of sales and profitability of Becrypt have slowed down in the last 10

years. The risk borne by these individual investors given the current economic downturn is also

high, which makes them more likely to accept our offer.

4. CURRENT OWNERSHIP5

Shareholder Relationship with Number of Holding

Becrypt shares proportion
David Gary Thomas COO 258,500 29.38%
Bernard Parsons CEO 118,000 13.41%
Stephen Bellamy Non-Executive Director 12,495 1.42%
Charles John Cowell CFO 6,000 0.68%
Management shares 394,995 44.89%
Nigel Williamson Lee Former Director 128,000 14.55%
Gordon Parrott Former Employee 118,000 13.41%
David Holman Former Director 80,000 9.09%
Benjamin Sidle Former Employee 58,500 6.65%
Other shareholders - 100,505 11.42%
Non-management shares 485,005 55.11%
Total shares 880,000 100.00%

5. OUTSIDE ANALYSIS

5.1. Opportunity: IMPACT Analysis

a. Industry

4
Becrypt’s Accounts in 2019 on https://beta.companieshouse.gov.uk/company/04328430/filing-history
5
Statement of Capital on 2015-11-26 on https://beta.companieshouse.gov.uk/company/04328430
Becrypt operates in cybersecurity industry with a focus on endpoint and data security. Their

main offerings include:

Offering6 Description

Paradox A security-focused operating system for cloud and online applications

A solution to reduce the risks and complexities of mobile platforms,

Advanced Mobile Device
support organisations managing Choose Your Own Device (CYOD)
Management solution (MDM+)
environments

Software Engineering Security audits of existing and planned cloud platforms

Paradox Edge An offering based on its Paradox that allows organisations to adopt a user

(Managed End User Device) device strategy that is optimised for cloud

The only product to complete NCSC CPA certification as a software full-

Disk Encryption disk encryption solution, it encrypts every section of the hard drive to

protect data at work and data in use.

b. Market

The global cybersecurity market was worth £131 billion in 2019 and is expected to reach £328

billion by 2026 (15% CAGR)7. UK cybersecurity market was estimated at £8.3 billion in 2019,

up 46% from £5.7 billion in 20178. Market growth is likely to be fuelled by the following

factors:

- Growth in adoption of IoT and BYOD: Increasing number of mobile devices within

organizations makes it difficult for IT teams to manage and track data flow in various

systems, thus cybersecurity is required to protect crucial information9.

- Remote working trend: As organizations adapt to post-COVID19 world, the need to

protect remote workers’ identities and devices induces new demand in data and

6
https://www.becrypt.com/uk/. See Appendix 7 for more details
7
Global Market Insights Report (2020)
8
Donaldson et al. (2020)
9
Sinnarkar and Baul (2019)
 endpoint security. 71% of UK business decisionmakers believe the shift to remote

working during the COVID-19 has increased the likelihood of a cyber-breach10.

- Growth in adoption of cloud computing: As enterprises transition to cloud, the number

of endpoints connecting to them expands exponentially. Each device constitutes a

potential cyber-attack vector11. Enterprises are predicted to spend $10.3 billion on cloud

security by 2023 with forecasted 17.6% CAGR12.

- Constant need to conform to regulations such as the recent EU’s General Data

Protection Regulation (GDPR).

Becrypt’s important market, the UK GovTech, may rise to £20 billion by 2025 from 2015’s

level of £12 billion13. This will be fuelled by a renewal of large IT contracts, a shift towards

procurement from SMEs, which is advantageous for Becrypt because of its close relationship

with the Government.

c. Positive PV

Firstly, Becrypt has strong cybersecurity expertise14. Secondly, its offerings have high level of

security yet with reasonable price ranges in comparison to their counterparts15 and it has several

proven customers: HMGovernment Cloud Client™, MiX Telematics, East West Railway

Company, QinetiQ, Ministry of Defence, Cheshire West and Chester. Thirdly, Becrypt proved

to be profitable with new offerings as shown in their income statements. Fourthly, Becrypt has

close connection with government and public sector both as solution provider and collaborator

in researching allowing Becrypt to save R&D expense (Becrypt also gets tax credit for R&D

10
Columbus (2020)
11
Canner (2019)
12
Forrester’s “Cloud Security Solutions Forecast, 2018 to 2023” Report
13
Desmond and Kotecha (2017)
14
See Appendix 8 for List of Becrypt’s Patents
15
Data on https://www.digitalmarketplace.service.gov.uk/. See Appendix 6 for Comparison on Product Prices
activities). Finally, Becrypt remains debt-free and funds their operations solely with operating

cashflows16.

d. Acceptance

Market acceptance for Becrypt’s offerings is relatively high. To illustrate, Paradox Edge was

introduced in 2017, it took the company approximately a year to commercialize it to up to 20

government departments in the UK, not to mention private sector and other markets17. Becrypt

already had large customer base since the launch of Disk Protection, hence the possibility for

cross-selling, especially its new offerings, is relatively high.

e. Competed

There are 1,221 cybersecurity firms active within the UK in 2019 reflecting 44% increase from

201718. The UK data security market has become increasingly competitive with around 225

providers19. However, the market is concentrated as almost 70% shares belongs to OneTrust

and Sophos. Similarly, the endpoint security market is also dominated by major players,

TrendMicro and Symantec, but it is not as competitive (less than 80 suppliers). Given Becrypt’s

effort to transition from its old offering within data protection market to newer endpoint

security offerings, it is likely to cope well with competition.

Competitive advantage of Becrypt is high security level that serves even the most security-

conscious organizations. They are good fit for enterprises demanding higher level of security

compared to off-the-shelf offerings from big players (TrendMicro, Symantec, OneTrust and

Sophos). Becrypt’s products are easy-to-use, highly resilient yet at low cost. A cybersecurity

start-up that also operates in the same segment as Becrypt and works closely with UK

16
See Appendix 1 and Appendix 2 for tax credit and debt items
17
Bicknell (2018)
18
Donaldson et al. (2020)
19
Data on https://www.datanyze.com. See Appendix 6 for Competition information.
government is Darktrace. However, their expensive AI-based security offerings have problem

of high rate of false alerts and consuming substantial resources from the start. It also requires

customers to have great understanding to make decisions based on these alerts.

f. Time

There are a number of favourable conditions for the cloud security and endpoint protection

market to thrive in upcoming years: the shift to remote working during the COVID-19 crisis,

the trend to migrate legacy systems to cloud in both public and private sector, BYOD trend,

recent regulation changes (GDPR).

g. Speed

Strategies can be implemented quickly as Becrypt is already established and has several proven

customers.

5.2. Uncertainties

The main concern is with competition in the commercial sector. Although Becrypt has a strong

presence in the UK public sector, they have limited penetration in the commercial sector and

lack brand awareness in the UK commercial market.

 - Product with strong
security level at - Ineffective marketing and
reasonable price

- High expertise and

20

S TRENGTH W EAKNESS
sales strategy

- Limited engagement with

R&D capacity channel partners

- Fit and competent CEO

- Recruitment and skill

shortages (68% cyber
- COVID-19 and the businesses tried to recruit
shift to remote working, cyber roles within the last 3
cloud computing and
BYOD trend
O PPORTUNITY T HREAT years21)

- Potential new entrants

- Increasing cyber (large providers of
security regulations telecommunications,
consultancies)

5.3. Management Team22

Director Position Description

Bernard Parson MBE CEO Becrypt’s co-founder with 25+ years' experience in software
company spanning robotics, embedded systems and
telecommunications. Parson has strong expertise and is
passionate about growing Becrypt
John Colwell CFO Responsible for Finance, HR, Production and IT, John has
extensive financial and commercial experience in technology
sector. Prior to joining Becrypt, John got several senior
international finance positions in global software businesses
Gary Thomas COO Becrypt’s original seed investor, he is currently responsible for
UK Sales, Engineering and Customer support.
However, his track record shows he has little experience in the
field he manages
Steve Bellamy Non-Executive He has 30 years of experience in managing and investing in high
Director growth and turnaround businesses.

20
See Appendix 6 for information of Becrypt’s Pricing Strategy
21
Cyber Security Skills in the UK Labour Market 2020 Report
22
Information on https://www.becrypt.com/uk/company/about-becrypt/
Management team lacks expertise in channel management, sales and marketing. Gary Thomas’

track record shows he has little experience in sales and marketing, so additional directors who

work solely on Sales, Marketing and Channel Management are desirable and also what we can

help Becrypt with.

5.4. Strategy

We can add more value by helping Becrypt refine sales, marketing and channel management

strategy. Becrypt’s marketing strategy does not succeed in approaching and grabbing interest

of its targeted customers, highlighting the value of its highly secure solutions over free products.

Becrypt also has limited engagement with channel partners and a limited network of partners,

which affects sales and customer engagement. VC can help complete the management team by

adding Channel Management Director and Chief Marketing Director who have excellent track

record in their fields23.

5.5. Investment requirements

a. Objective of investment: Our targeted ROE is 40%.

b. Valuation

P/E of Comparable Firms Table

Company Segment P/E24
Trend Micro Incorporated Server, cloud, and content security 27.39
Symantec Endpoint protection 16.8
Check Point Software Technology Ltd. Unified threat management 18.47
F5 Networks, Inc Cloud & data center security 18.72
NortonLifeLock Endpoint, cloud & mobile security 22.17
Zix Corporation Email encryption & data protection 20.77
Cisco Systems, Inc IT, networking, and cybersecurity solutions 14.69
Akamai Technologies, Inc Security, cloud delivery, performance 28.38
Absolute Software Endpoint security 33.06
Average P/E 22.27

23
See Appendix 5 for 100-Day Plan
24
P/E data of comparable firms on https://www.macrotrends.net/ as of May 13th 2020
Earnings Forecasts and Valuation Table Unit: GBP
Year 2019 2020* 2021* 2022* 2023* 2024* 2025*
Revenue 12,060,000 19,000,000 24,000,000 29,100,000 30,000,000 31,500,000 12,060,000
Gross 8,440,000 13,300,000 16,800,000 20,360,000 21,000,000 22,050,000 8,440,000
Profit
Operating 345,000 1,300,000 1,820,000 2,420,000 2,880,000 3,610,000 345,000
Profit
Net Profit 240,000 480,000 840,000 1,260,000 1,580,000 2,100,000 240,000
Firm value 5,345,333 46,771,667
Share price 6

Note: By rough estimation, Becrypt needs to find approximately 95 customers in year 2025 to meet the targeted PAT.
Considering the fact that for just one year after launching Paradox Edge, Becrypt already got 20 customers solely in
government departments (not to mention the public and private sector), we believe that this target is feasible25.

c. Deal Description and Financing Structure

VC investment £3,500,000
- VC loan £3,350,000
- VC equity £150,000
Management investment £100,000
Bank loan £5,000,000
Total funding £8,600,000
Shares bought from non-management investors 485,005 shares
Price at which shares are bought back £6
Funding to buy back shares £2,943,980
Remaining funding to invest in firm £5,656,020

Note: The fund financed by VC, management and bank loans is used to buy out the remaining shares of Becrypt held by
non-management shareholders and the rest is invested in expanding Becrypt.

5.6. Deal structure

Proportion of holding in shares Proportion of holding
New equity
Investor Becrypt has bought back in total outstanding
investment
(representing 55% shares) shares
Total VC equity 33%
- VC’s new equity £150,000 60% 33%
Total management equity 67%
- Management's new £100,000
40% 22%
equity
- Management already -
45%
held

Note that Becyrpt’s management already held 45% outstanding shares. The buyout is intended for buying back the
remaining 55% shares from other shareholders. The shares bought are distributed among VC and management, then
adjusted proportionally to take into account the shares management initially held (i.e final holding of management team
is % × % + % = %.

25
See Appendix 4 for Earnings Forecasts and Underlying Assumptions
 5.7. Estimated Exit Valuation

Return at exit VC Management

- Equity £15,466,699 £36,460,534
- Loan £3,350,000 -
Total return £18,816,699 £36,460,534
40% -
ROE
(= Target Return)

6. POTENTIAL EXIT ROUTE

Desirable exit route is through trade sale. One expected purchaser is O2. Recently, it is common

for telecommunication companies to expand to IT, including cybersecurity (Orange acquired

SecureLink, Cisco acquired Sentryo). O2 has already had a large network of customers in

government departments and public sector, therefore the good product fit of Becrypt in this

segment might be of interest to O2.

7. SENSITIVITY ANALYSIS

Conservative Scenario26 Forecast and Valuation Table Unit: GBP

2020 2021 2022 2023 2024 2025
Revenue 12,060,000 9,500,000 12,000,000 14,550,000 15,000,000 15,750,000
Gross Profit 8,442,000 6,650,000 8,400,000 10,185,000 10,500,000 11,025,000
Operating
4,394,500 650,000 910,000 1,215,000 1,440,000 1,805,000
profit
Interest
610,510 610,510 610,510 610,510 610,510
Expense
Operating
4,394,500 39,490 299,490 604,490 829,490 1,194,490
profit
Tax 1,318,350 11,847 89,847 181,347 248,847 358,347
Net profit 3,076,150 27,643 209,643 423,143 580,643 836,143
Valuation at
18,622,763
Exit

26
The new software and services offerings do not gain much market traction, Becrypt suffers from fierce
competition. Only half of the target number of customers and target return is realized.
Optimistic Scenario27 Forecast and Valuation Table Unit: GBP
2020 2021 2022 2023 2024 2025
Revenue 12,060,000 28,500,000 36,000,000 43,650,000 45,000,000 47,250,000
Gross Profit 8,442,000 19,950,000 25,200,000 30,555,000 31,500,000 33,075,000
Operating
347,000 7,950,000 10,220,000 12,615,000 13,380,000 14,635,000
profit
Interest
610,510 610,510 610,510 610,510 610,510
Expense
Operating
347,000 7,339,490 9,609,490 12,004,490 12,769,490 14,024,490
profit
Tax 104,100 2,201,847 2,882,847 3,601,347 3,830,847 4,207,347
Net profit 242,900 5,137,643 6,726,643 8,403,143 8,938,643 9,817,143
Valuation at
218,649,590
Exit

Return Scenario Analysis Table Unit: GBP

Conservative Scenario Likely Scenario Optimistic Scenario
VC Loan 3,350,000 3,350,000 3,350,000
VC Equity 6,158,273 15,466,699 72,304,190
Management Equity 12,464,490 36,460,534 146,345,401
VC Return 9,508,273 18,816,699 75,654,190
Management Return 12,464,490 36,460,534 146,345,401

Multiple Scenario Analysis Table Unit: GBP

Scenario Company Exit Valuation VC Return VC Invested Capital VC Multiple
Conservative 18,622,763 9,508,273 3,500,000 2.72
Likely 46,771,667 18,816,699 3,500,000 5.38
Optimistic 218,649,590 75,654,190 3,500,000 21.62

27
The new software and services offerings are successful, Becrypt sustains its competitive advantage and
increases its market shares. The number of customers and return increase by 50% compared to target levels.
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 APPENDIX 1: INCOME STATEMENT

Unit: GBP
Year ended 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Turnover 7,248,658 6,125,721 6,421,743 5,797,461 8,562,918 6,631,492 6,555,927 6,571,770 8,010,440 8,703,415 10,107,592 5,213,552
Cost of sales (2,016,211) (360,311) (100,943) (246,866) (457,361) (204,974) (73,577) (118,099) (187,655) (113,955) (446,880) (241,528)
GROSS PROFIT 5,232,447 5,765,410 6,320,800 5,550,595 8,105,557 6,426,518 6,482,350 6,453,671 7,822,785 8,589,460 9,660,712 4,971,994
R&D (1,765,121) (2,018,555) (1,989,017) (1,892,056)
Administrative expenses (3,426,479) (3,725,626) (4,318,827) (4,391,683) (7,794,934) (6,465,572) (7,074,973) (7,041,532) (8,318,740) (8,198,330) (6,579,188) (4,096,953)
Other operating income 0 10 0 1,305
OPERATING PROFIT 40,847 21,229 12,956 (733,144) 310,623 (39,054) (592,623) (587,861) (495,955) 391,140 3,081,524 876,346
Interest receivable and similar
- 4,140 741 2,413 3,125 2,295 11,961 29,366 19,928 22,266 123,154 7,536
income
Interest payable and similar
- (5,553) (1,744) (3,385)
charges
PROFIT BEFORE TAX 40,847 25,369 13,697 (730,731) 313,748 (36,759) (580,662) (558,495) (476,027) 407,853 3,202,934 880,497
Tax on profit 160,343 70,642 242,231 142,645 - 393,727 (81,764) 20,300 21,842 412,338 (543,874) (305,000)
Profit for financial year 201,190 96,011 255,928 (588,086) 313,748 356,968 (662,426) (538,195) (454,185) 820,191 2,659,060 575,497
Profit for the year
201,190 96,011 255,928 (588,086) 313,748 356,968 (662,426) (538,195) (454,185) 820,191 2,659,060 575,497
attributable to:
Owners of the company 201,190 96,011 255,928 (588,086) 313,748 356,968 (662,426) (538,195) (454,185) 820,191 2,659,060 575,497
Turnover Growth 18.3% -4.6% 10.8% -32.3% 29.1% 1.2% -0.2% -18.0% -8.0% -13.9% 93.9% 53.4%
PBT Growth 61.0% 85.2% -101.9% -332.9% -953.5% -93.7% 4.0% 17.3% -216.7% -87.3% 263.8% 120.4%
R&D Expenditure/ Turnover 34% 33% 31% 33% 0% 0% 0% 0% 0% 0% 0% 0%
R&D Expenditure/ Operating
34% 35% 32% 30% 0 0 0 0 0 0 0 0
cost
PAT Growth 110% -62% -144% -287% -12% -154% 23% 18% -155% -69% 362% 44%
 APPENDIX 2: BALANCE SHEET

Unit: GBP
Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
ASSETS 4,872,551 4,132,043 3,409,385 3,352,390 5,757,401 4,462,809 4,399,026 4,233,698 5,377,197 5,222,505 5,288,149 4,452,220
Fixed assets 87,066 129,753 126,713 145,655 227,416 176,990 86,774 162,671 361,440 596,399 379,320 31,754
- Tangible assets 87,066 129,753 126,713 145,655 227,416 176,990 86,774 162,671 361,440 596,399 379,320 31,754
Current assets 4,785,485 4,002,290 3,282,672 3,206,735 5,529,985 4,285,819 4,312,252 4,071,027 5,015,757 4,626,106 4,908,829 4,420,466
- Stocks 11,624 158,222 68,978 25,168 32,274 32,726 40,154 60,328 32,573 21,873 41,825 -
- Debtors 2,275,497 2,157,364 1,419,479 1,654,500 1,423,932 1,324,770 1,338,731 1,751,187 2,233,598 2,454,538 1,875,988 3,742,156
- Cash at bank and in hand 2,498,364 1,686,704 1,794,215 1,527,067 4,073,779 2,928,323 2,933,367 2,259,512 2,749,586 2,149,695 2,991,016 678,310
CREDITORS 4,230,187 3,683,752 3,060,947 3,258,260 5,000,994 4,018,588 4,303,481 3,400,617 3,953,170 3,404,799 4,348,342 4,045,898
- Short-term debt 3,465,049 3,478,031 2,795,945 2,857,144 4,274,940 3,189,931 3,465,475 2,866,979 3,207,798 2,791,782 3,671,715 3,661,452
- Long-term debt 765,138 205,721 265,002 401,116 726,054 828,657 838,006 533,638 745,372 613,017 676,627 384,446
NET ASSETS 642,364 448,291 348,438 94,130 756,407 444,221 95,545 833,081 1,424,027 1,817,706 939,807 406,322
CAPITAL AND RESERVES 642,364 448,291 348,438 94,130 756,407 444,221 95,545 833,081 1,424,027 1,817,706 939,807 406,322
Called up share capital 176 176 176 176 176 176 176 176 176 176 176 223
Share premium account 111,304 111,304 111,304 111,304 111,304 111,304 111,304 111,304 111,304 111,304 111,304 111,304
Capital redemption reserve 47 47 47 48 47 47 47 47 47 47 47 -
Other reserves 247 247 248 234 234 226 179 117 113 53 35 35
P&L account 530,590 336,517 236,663 (17,632) 644,646 332,468 (16,161) 721,437 1,312,387 1,706,126 828,245 294,760
APPENDIX 3: CASH FLOW STATEMENT

Unit: GBP
Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010
Cash flows from operating 837,011 (16,497) 372,833 (2,493,833) 1,331,892 162,686 710,316 (452,219) 650,580 (430,531)
activities
Cash flows from investing (25,351) (91,014) (105,698) (52,880) (186,444) (167,777) (36,523) (37,859) (50,748) (448,492)
activities
Cash flows from financing 0 0 13 1 8 47 62 4 60 18
activities
APPENDIX 4: EARNING FORECASTS AND UNDERLYING ASSUMPTIONS

Unit: GBP
Year 2019 2020* 2021* 2022* 2023* 2024* 2025*
Revenue 7,248,658 12,060,000 19,000,000 24,000,000 29,100,000 30,000,000 31,500,000
Gross
5,232,447 8,440,000 13,300,000 16,800,000 20,360,000 21,000,000 22,050,000
Profit
Operating
40,847 345,000 1,300,000 1,820,000 2,420,000 2,880,000 3,610,000
Profit
PBT 345,000 689,490 1,209,490 1,809,490 2,269,490 2,999,490
Net Profit 201,190 240,000 480,000 840,000 1,260,000 1,580,000 2,100,000
Firm value
5,345,333 46,771,667
at exit
Share price 6

Our forecasts are subject to the following assumptions:

 We assume that revenues in 2020 and 2021 grow significantly from 57 – 66%; revenue

growth in 2022 and 2023 slows down with the rate from 21 – 26%, 2024 and 2025’s

revenues level off with negligible growth rate of 3 – 5%. 2020’s revenue is expected to

rise fast due to the opportunity from COVID-19 and the fact that Becrypt successfully

commercialized Paradox to a large public sector organization, such that all these

revenues will flow into FY 19-20 and FY 20-21.

 Gross profit margin over 5 years’ period is assumed to be equal to the 2019’s level of

70%.

 Sales, General and Administrative Expense and R&D Expense are assumed to growth

at approximately the same rate as revenue growth in the corresponding year.

 The £5,000,000 bank debt is assumed to accumulate annual interest rate of 10%. The

debt principal repayments are 5 equal payments of £1,000,000 each year. The annual

interest paid on the loan is assumed to be £610,510.

 Tax rate is assumed to be 30%.

 The revenue per customer per product is assumed to be £30,000. The Company

currently has 6 main products. We assume that the Company can introduce 5 more

products over five following years corresponding to the increase in the scale of R&D

investments. Thus the outstanding figures of customers per product that the Company

needs to have in order to achieve the target revenue are: (2020) 67 customers; (2021)

90 customers; (2022) 90 customers; (2023) 108 customers; (2024) 100 customers;

(2025) 95 customers.

 It is assumed that the company goes through buyout in 2020 and exits in 2025. The

price at which the management and us buy out the firm is the valuation value at year

2020, which is assumed to be £6/ shares, given 880,000 outstanding shares.

APPENDIX 5: 100-DAY PLAN

1. Identify and recruit Channel Management Director and Marketing Director

2. Hep identify sales and marketing talent

3. Help identify strong IT cybersecurity engineers

4. Carry out market research for product development

5. Work with company to identify and approach potential commercial customers, develop

marketing strategy and branding message that focus on target customers

6. Work with company to broaden its network with government and quasi-public

corporations

7. Introduce company to appropriate reseller partners. Work with Channel Management

team to provide reseller network with co-marketing support, lead generation, technical

knowledge training and product insights. Help the team establish customer support

process in order to provide on-time technical support.

8. Work with Channel Management team and design attractive incentive scheme to

motivate reseller partners

APPENDIX 6: COMPETITION

The data is collected on Market shares of Data Security segment

https://www.datanyze.com/market- in UK
share/ as of June 7th 2020. They
calculate the market share data by
taking the number of websites using
the technology and dividing it by the
total websites using any technology in
the same category.

According to this database, there is no

data of Becrypt’s share in Data
Security, while its share in Endpoint
Protection segment is 0.38%.
OneTrust Sophos Microsoft BitLocker
Tandberg Data Clearswift Other players

Market shares of Endpoint Protection As we check websites of Becrypt’s

segment in UK customer list, they do not mention
the use of Becrypt’s product on
their website. It is possible that this
database does not consider the
public segment, which is a large
share of Becrypt’s customers. It
may show Becrypt’s lack of
penetration in the commercial
sector, and a space for VC to help
the company.

Trend Micro Symantec Endpoint Protection These data are still investigated to
McAfee VirusScan Kaspersky study the competitive of the two
Lumension Other players segments where Becrypt operates.
 The graph below compares the pricing of Becrypt’s Paradox Edge with products having similar

features that are commercialized on the platform

https://www.digitalmarketplace.service.gov.uk/.

Paradox Edge's pricing compared to similar products

250
208
200
£/user/month

150 130

100 70 79
55
50 19.8 20
12.8
0
NVT Group Hardenize Becrypt Ltd AdEPT Redcentric Computacenter SVGC Limited UKCloud Ltd
Telecom plc Solutions (UK) Ltd
Limited
Concepta Network and Paradox Edge AdEPT Nebula Cloud Computacenter SVGC Portworx
Security Security Hosted Workspace – IT Service Capability Enterprise from
Services Configuration Desktop Management Management UKCloud
Monitoring Tool (ITSM) Cloud Software
(Standard)
APPENDIX 7: DETAILED DESCRIPTION OF OFFERINGS

1. Desktop and Thin Client Security

- Paradox software: A security-focused operating system for cloud and online applications

that is developed in collaboration with the National Cyber Security Centre (NCSC). Its

customers range from Governments to private enterprises, those that want to access online

services and need enhanced level of security to protect their endpoint devices from malware

and even targeted cyber-attacks. Use cases of Paradox include thin client environments where

organizations need additional level of security that they do not get with standard off-the-shelf

thin clients; kiosk environments; remote working environments.

- Paradox Edge service (Managed End User Device): An offering based on its Paradox

security-focused “cloud client” operating system. It allows organisations to adopt a user device

strategy that is optimised for cloud including the operating system and applications running on

devices as well as an application management platform hosted in the cloud.

2. Data Protection

- Disk Protect: Disk Protect CPA works by transparently encrypting every section of the hard

drive to protect data at work and data in use. Disk Protect is the only product to complete the

National Cyber Security Centre (NCSC) Commercial Product Assurance (CPA) certification

as a software full-disk encryption solution for desktops, laptops, tablets and servers. It is

formally advised by National Technical Authority for Information Assurance (CESG) that it

can protect information classified as Sensitive, Secret and Top Secret for UK public sector and

wider supply chain that work with the government. The commercial version of it is Data

Protection Suite, which is scalable to the requirements of SMEs, ensuring compliance to

industry standards, including GDPR.

- Disk Protect Enhanced: A solution that was developed for high-assurance environments

such as governments, military and NATO.

3. Communication Security

- Advanced Mobile Device Management solution (MDM+): A solution to reduce the risks

and complexities of mobile platforms, which can efficiently support organisations managing

Choose Your Own Device (CYOD) environments. It is particularly suitable for organizations

with high-value IP and governments.

- Bulldog: A solution to secure voice, video and data communication which is compatible with

Apple™ IOS, Android™ and Windows™ devices.

- Convex430: A secure smartphone from Becrypt and Bittium. It provides users with a secured

platform and hardened Android™ OS which are embedded with Becrypt security features.

Convex430 is appropriate for high-assurance customers: defence forces, security and police.

4. Software Engineering

Security audits of existing and planned cloud platforms, which helps detect, analyse and

respond to cybersecurity incidents while ensure compliance with current guidelines for cloud

platforms.

5. Managed Security Operations Centre

A service that helps customer managing threats and vulnerability to suspected anomalies,

detect and respond to internal and external malicious activity.

APPENDIX 8: LIST OF BECRYPT’S PATENTS28

Date of Patent/
Patent Type Inventors
Publication date
System, method, and device
Bernard Parsons, Nigel
having an encrypted operating Grant October 3, 2017
Lee, David Holoway
system
Computer implemented Bernard Parsons, Nigel
Grant July 18, 2017
security method and system Lee, Ben Sidle
System and method for James Ben Sidle, Bernard
unattended computer system Grant November 24, 2015 Parsons, Nigel Lee,
access Gordon Parrott
System and method for
Marc Hocking, Nigel
providing a secure computing Grant December 20, 2011
Lee, Andrew Palka
environment
Encryption system and method Bernard Parsons, Nigel
Application September 25, 2014
of encrypting a device Lee, David Holloway
Computer Implemented Bernard Parsons, Nigel
Application November 28, 2013
security method and system Lee, Ben Sidle
Dual Environment Computing
System and Method and Andrew Palka, David
System for Providing a Dual Application November 29, 2012 Holloway, Nigel Lee,
Environment Computing Bernard Parsons
System
System and method for James Ben Sidle, Bernard
unattended computer system Application October 6, 2011 Parsons, Nigel Lee,
access Gordon Parrott
System and method for
Marc Hocking, Nigel
providing a secure computing Application March 12, 2009
Lee, Andrew Palka
environment
Bernard Parsons, Gordon
Security system and method Application July 27, 2006
Parrott

28
Information on https://patents.justia.com/assignee/becrypt-limited