Stephane Fitch
Little Ipsotek has great antiterrorism technology. Is that enough for a business?
The failed car bombings in the U.K. last month gave a showcase role to security technology. Security cameras recorded men leaving the scene of the two unexploded car bombs in London. License-plate-reading software on highway cams helped lead police to Scotland--and the fiery auto attack on Glasgow Airport.
Such threats represent opportunity to Andrew Malim, a 64-year-old Brit who sells video analytics software for the U.K.'s ubiquitous closed-circuit tv cameras. Malim is chief executive of
Ipsotek, a tiny developer of visual-intelligence systems he picked up in late 2005 for $660,000, most of it raised from banker friends (Malim himself bought an 11% share). Since then he's chalked up some nice accounts. In May he landed a contract with the new owners of London's 20,000-seat Millennium Dome, recently reopened (under the name The o2) and the future site of gymnastics and basketball competitions at the 2012 Olympics. His software will monitor cameras outside the Saatchi Gallery. And he is also installing Ipsotek software on cameras at the Brit Oval cricket stadium, which seats 25,000 and hosts matches with teams from Pakistan and elsewhere. Ipsotek can "do for security cameras what Dolby did for hi-fi stereo," says Malim.
Ipsotek has great technology but is struggling--the result of entrenched competition, poor marketing and underconfidence at the top. In his two previous ventures Malim squeezed out some profits, but his timing was disastrous. In 1980, the year gold began its two-decade plummet, he launched a mining investment firm, surviving by shifting from commodities trading to providing venture capital to small prospectors. In 2000, on the cusp of the dot-com collapse, he founded a Wi-Fi company. He scraped along by picking up exclusive rights to sell wireless broadband access at 400 airports, rail stations and hotels, then bundling the "hot spot" contracts for sale to Swisscom.
Spy cams are now hot. Worldwide sales will approach $100 million this year, says London research firm Frost & Sullivan, and rise 23% annually for the next few years. But there are more than two dozen video analytics firms.
Ipsotek is a shrimp. Malim expects losses in 2007 on estimated revenue of $3 million. That puts him well behind ObjectVideo (projected 2007 sales: $30 million) of Reston, Va., founded by scientists and managers from the U.S. Defense Advanced Research Projects Agency, which is monitoring platforms for the New York City subway system; and Israel's Nice Systems, a $500-million-a-year maker of digital recording systems that also sells analytics and keeps an electronic eye on Paris' Eiffel Tower.
Malim charges more than $2,000 per camera, two to three times what ObjectVideo and other rivals charge for their software. Getting better distribution would help him catch up, but Malim hasn't sought a merger partner. No telling whether Ipsotek can survive on its own. "There will absolutely be consolidation," says Gavin Long, security tech analyst at USBX, in Los Angeles. Security firms like ADT and Chubb and big camera makers like Panasonic, Philips, Sony and Siemens will focus on but a few vendors. Their distribution clout will likely determine which software packages win in the end. Says Long: "Only a fool thinks the industry will be won by the best technology."
Still, Ipsotek is banking on its sophisticated software, developed over nine years with $10 million (mostly in U.K. and European Union grants) by Kingston University researchers Sergio Velastin and Boghos A. Boghossian. While most analytics programs, like those that operate in CCTV cameras, typically seize on any object in a scene that moves--and can be tricked by flocks of birds, say, or falling snow--few can detect trouble in crowded scenes and so don't work well in the real world. Ipsotek's software also tracks motion but then takes a crucial second step: It seeks out the edges of objects and performs calculations based on how the outline of an object moves (or remains static) against the background. In this way it can spot a man running in front of rustling tree or detect an abandoned backpack on a busy train platform.
This spring Malim began raising $4 million in the hopes of adding ten or so salespeople and tech supporters to that group of five and recently hired away ObjectVideo's leading sales guy in the U.K. But Malim himself is not well known in the security industry, and that is an obstacle in his efforts to persuade Philips, Sony or Panasonic to offer a line of cameras preloaded with Ipsotek software. (Siemens already owns an Atlanta video analytics software company, VistaScape Security Systems.) The most natural partner may be Philips; Ipsotek's software is configured to run on Philips' Trimedia video chip, which performs 50 billion operations per second --ninefold faster than the Texas Instruments (nyse: TXN - news - people ) chip popular among Ipsotek rivals.
Malim also has something else working in his favor: camera-mad Britain. Ever since the terrorist attacks by the Irish Republican Army in the 1980s and 1990s the island is an incubator of CCTV technology. Its 4 million security cameras are five times as numerous per capita as those in the U.S. and 40 times as plentiful per square mile.
Perhaps Ipsotek can focus on the high end of the market and leave the mass contracts to others. Install Ipsotek software in 5% of the security cameras in the U.K., Malim says, and there's $400 million in sales. Ipsotek is one of just two British analytics companies in a position to bid for the software contract for the security cameras at the 2012 Olympics, Malim believes. "For the first time in my life," he says, "I feel I am in exactly the right place at precisely the right moment."
Still, he frets, Ipsotek should be raising $10 million in its next financing round. To bring in that kind of cash, he's considering stepping aside. Says he, adding cheer to a stiff upper lip: "The board thinks, and I think, too, we're going to need a chief executive with a real record of growing a technology company like this to full scale."
Still, he frets, Ipsotek should be raising $10 million in its next financing round. To bring in that kind of cash, he's considering stepping aside. Says he, adding cheer to a stiff upper lip: "The board thinks, and I think, too, we're going to need a chief executive with a real record of growing a technology company like this to full scale."
By the Numbers
We See You
Spy cams may soon be ubiquitous in the Western World.
300 The number of times per day the average Londoner is spotted on CCTV.
$212 million The value of spy cams and software being installed in the New York City subway system.
39% The percentage of European security cams aimed at preventing violence.
50 The number of DVDs needed to store a month's worth of video from one camera.
Sources: USBX; Center for Technology & Science; CCTV Image.
