Banjo: What Did SoftBank Money Buy?
May 11, 2020
We completed an analysis of Banjo’s intellectual property. Note: the Banjo url ends in jo, not com. The company — despite its low, low profile since 2016 — has been a reasonably active policeware vendor. Is the activity directed at publicity? Expanding its sales force? Developing a platform comparable to Amazon’s sprawling policeware initiative?
Nope.
The firm has been patenting and repatenting some of its ideas. A quick example is the method disclosed in a paper by one of Banjo’s first employees: “Lateral Thinking in Search Engines” by Yann Landrin-Schweitzer, et al, in Genetic Programming and Evolvable Machines, March 2006. You can locate a copy of this infrequently cited document at this link. Note: you may have to pay to view the document.
The ideas were evident in Banjo’s consumer app, which will not be discussed in this brief blog post, and again in the post-pivot patent documents.
The method, known for decades, was popularized by Endeca. The idea is to find, show, or leverage in some fashion related content. Some of the now disgraced search and retrieval evangelists called this “side search.”
For an example of Landrin-Schweitzer’s influence, check out US 8,341,223, Method for relevant content discovery. Since the patent document was filed in mid 2012, Banjo has made this method one of its key foundation stones.
What is interesting is that Landrin-Schweitzer left the company about the time the patent document was in process.
DarkCyber wants to point out that the “hot” technology powering the LiveTime unique capability is not particularly distinctive. Granted, Banjo has built a system which processes video and combines it with other inputs to generate alerts.
Nevertheless, the low profile adopted by the company may have been a way to reduce public scrutiny of what technology was the foundation for the interesting claims the company’s PR made.
I want to note that the DarkCyber research team tracked some of Banjo origin story to Jennifer Peck, worked at Banjo and who later married Mr. Patton. (Did the marriage or common sense stop the PR about Banjo which flowed in a steady stream until the end of 2015?)
Shifting gears the NASCAR way stabs the accelerator for more capital. SoftBank invested $100 million in Banjo in early 2016.
What is interesting is that the SoftBank due diligence process seems to have overlooked [a] some aspects about Mr. Patton and possibly the firm’s origin story, [b] Mr. Patton’s hackathon “wins” at a Google event and in an event held in China with “original” code, [c] and the firm’s core technology, [d] Landrin-Schweitzer’s contributions.
Mr. Patton’s trajectory from homeless waif in LA to the US Navy and military warfighting to NASCAR to construction to genius coder seems to be well crafted, almost like a feat of Baron Munchausen. The positioning of the company as one that wants to “save lives” could be a modern parable crafted on Madison Avenue to elevate the company above the likes of Palantir Technologies.
Wrapping the “good” cloth around surveillance technology is a PR plus to some. Plus, Banjo manifests Patton’s white knight accoutrements in the little known world of policeware applications. Also the factoids about Mr. Patton’s hard fought effort to obtain a college education and how a hitchhiking ride made an education possible could be inspiring to a befuddled and homeless youth. Does this remind anyone of a Jim Bakker? A modern version of a Horace Greeley tall tale?
Several questions:
- Are the other technology foundation stones unique and rock solid?
- How much of the technology embodied in Banjo is unique?
- What are the due diligence processes used by investment firms when facts suggest the founder’s past has not been vetted?
DarkCyber thinks that Banjo is an interesting firm. We have prepared a summary of Banjo’s intellectual property. If you are interested in learning more about this report, write benkent2020@yahoo.com.
The May 12, 2020, DarkCyber video program has more Banjo related content. You can view that video at this link. Remember: No ads, no search engine optimization, no begging for dollars. Just information.
Stephen E Arnold, May 11, 2020
Banjo Targets an F Sharp and Breaks a Polyweb String
May 10, 2020
Policeware vendor Banjo continues to make headlines. (This may be welcome news to NSO Group, another low profile firm which has been in the spotlight recently.)
The Banjo story is one of the features in the DarkCyber video news program which becomes available on Tuesday, May 12, 2020.
Mr. Patton graduated from the University of North Carolina Greensboro. NASCAR helped him get a degree after his discharge from the US Navy. He served in an intelligence unit and participated in military activities in the Middle East. He allegedly races trucks.
There’s an update to the interesting revelations about the founder Damien Patton. Mr. Patton started a company sometime between 2011 and 2013 called Banjo. The original idea was a social media app. The function was to ingest Tweets and other content and display who was nearby. After some excitement about privacy, Mr. Patton pivoted and created a policeware company.
The angle was to use real time live video and content from social media sources like Twitter and Facebook to inform law enforcement about events. Unlike some of the policeware companies, Mr. Patton’s spin was that Banjo would be used to save lives and do good.
By 2016, Mr. Patton has wrapped up about $131 million in funding and bundled his past underneath the firm’s PR blitz. The “news” about Banjo and Patton played up a rags to riches story: From Mr. Patton’s homelessness to the US Navy, from a NASCAR grease pit to entrepreneurial clover.
Until… the story emerged about Mr. Patton’s activities in his youth. The allegations included the KKK, shooting up a religious facility, and rubbing elbows with interesting characters.
Where are we now?
“Banjo CEO Steps Down as Fallout from the Revelations of Past Ties to KKK Continues” brings us up to date. The write up states:
Embattled event detection tech firm Banjo announced Friday that the company’s current CEO and founder, Damien Patton, has resigned and the company will transition to a new leadership team with current Chief Technology Officer Justin R. Lindsey taking over the top position.
And the investors?
One of the principal sources of funding for the company is SoftBank, a firm which has the distinction of investing substantial funds in WeWork.
Now the firm has a new president, probably some agitated investors, and the distinction of becoming the first policeware company to hurtle from obscurity to headlines in a matter of a couple of days.
One question: “What did Banjo do with the investment funds obtained from investors?” DarkCyber opines that the patent filings in the last four years indicate inventing and fencing in its real time services consumed time and effort.
Banjo has amassed a number of patents related to its real time analysis of content. One of the early employees (Yann Landrin-Schweitzer) and co inventor of Banjo’s foundational technology said adios after a short stint at the company. Despite the assertions that the company has hundreds of employees in offices in California and Utah, Banjo has kept a low, low profile since 2016. Paying customers have not be enshrined on the company’s Web site at www.banjo.co.
Net net: This is an interesting story, and it does little to build confidence in the vendors providing specialized services to law enforcement and intelligence agencies. At one time, companies like Banjo kept a low profile, tried to avoid problems, and served a tight lipped clientele. NSO Group broke with tradition. But NSO’s legal spat with Facebook has been shoved off state.
Now we have a NASCAR type booth featuring a banjo player. What does it cost to see the show? John Malloy at BlueRun paid a couple of million. But Masayoshi Son put an estimated $100 million to get a piece of the act.
Was it worth it?
The reviews are just starting to come in, and they are a little negative. This could be a new PR challenge for Jennifer Peck, the PR wizard who helped orchestrate the Damien Patton story.
Observations:
- Having skeletons in one’s closet related to the KKK and a drive by shoot up of a synagogue are not useful when selling to law enforcement and intelligence entities
- Losing contracts and having government officials in Utah scrambling to figure out if Banjo’s algorithms are biases poses a challenge to other policeware vendors. Algorithms are indeed biased, but figuring out where the bias creeps in and how it effects the outputs of a smart system is a tar ball. This is probably not a plus for other policeware vendors.
- Agitating SoftBank’s president Masayoshi Son is possibly an unwelcome side effect of this situation. The investment in Banjo is going to require time and probably more money to get the company back on track.
The DarkCyber video segment about Banjo becomes available at www.arnoldit.com/wordpress early Tuesday, May 12, 2020.
Stephen E Arnold, May 10, 2020
Banjo: Pressured into Playing a Sad Tune
May 1, 2020
DarkCyber has noted NSO Group’s PR challenge. That low profile provider of policeware is tangled in litigation with Facebook. Years ago Geofeedia made headlines and never quite bounced back.
Policeware and intelware vendors traditionally have operated with a low profile. Most of the vendors offer a “contact” option, but the vendors respond only if the person wanting contact is a “legitimate” actor.
Banjo was no different. Two inquiries DarkCyber made were ignored. Now information about Banjo is plentiful. Deseret News reports that Banjo has ceased operations. The New York Post (hardly a bellwether for the policeware/intelware sector) reports “Banjo App CEO Damien Patton Reportedly Has KKK Past, Helped in Synagogue Shooting”. This article recycles the original report from Medium on April 28, 2020. Even the “real news” outfit Boing Boing jumped on the story.
What’s interesting is that SoftBank invested $100 million in the Banjo outfit. Its due diligence failed to make a connection between Mr. Patton’s past and his role as a policeware/intelware startup. Did SoftBank rely on the same professionals which assisted Hewlett Packard in its assessment of Autonomy?
Several observations:
- PR can have a major impact on a policeware/intelware vendor. This is an important point because dozens of specialist vendors primarily chasing LE and intel contracts are doing more marketing. Is Madison Avenue the right street to take.
- SoftBank has to figure out what to do with Banjo. DarkCyber assumes that other investors will be doing some thinking as well. Is there a way forward for the company.
- The “reason” for missing the bus with regard to Mr. Patton’s biography is a misspelling. That’s quite an interesting assertion. Shouldn’t an investigator, analyst, or researcher note that court documents still have Mr. Patton’s last name spelled correctly. Is “good enough” research the new normal?
Net net: There is good PR and bad PR. Which category does the tale of the misspelling tell?
Stephen E Arnold, May 1, 2020
Policeware and Intelware: Change Underway, Pushback Likely
April 29, 2020
Law enforcement and intelligence are tricky subjects. For decades, the work of government employees and the specialized firms supporting sensitive operations have worked to stay out of the headlines. The spotlight was for rock stars and movie icons, not for investigators, security, and intelligence professionals.
Most of the companies in what I call the policeware and intelware markets have to and prefer to work with people who have been in their foxhole. The result has been the equivalent of a stealth market sector. The clients — traditionally government agencies — like the low profile approach as well. Many of the activities of these professionals and the firms supporting their operations are in a position of considerable risk.
But that seems to be changing. Recent examples include:
Cellebrite’s Covid campaign. The idea is that specialized mobile phone analysis tools can assist with the pandemic. You can read about this in “Cellebrite Pitching iPhone Hacking Tools As a Way to Stop COVID-19.”
A lone wolf employee. You can learn that the NSO Group finds itself in the middle of another PR issue. You can read about this challenge in “NSO Employee Abused Phone Hacking Tech to Target a Love Interest.”
A little known past of a high profile innovator. The somewhat unusual company Banjo finds itself in the spotlight over the allegations made about the firm’s founder. You can read about this in “CEO of Surveillance Firm Banjo Once Helped KKK Leader Shoot Up a Synagogue.”
These examples — if accurate and verifiable — suggest that Silicon Valley attitudes have penetrated the developers of policeware and intelware.
The majority of the companies providing specialized services are probably operating in a reasonably responsible way. Today policeware and intelware have become a multi billion dollar a year market. Most people will never encounter outfits with names like Elbit, Gamma or iCarbon X, and hundreds of others.
The fact is that the behaviors of a small number of companies is causing the policeware and intelware vendors to become the stuff of the talking heads on televised news programs, the launch pad for tweets and blog posts, and a source of embarrassment for the government entities relying on these companies and their products.
What troubles DarkCyber is that an increasing number of vendors of specialized services have realized that many government functions cannot operate without their expertise, products, and engineering. Consequently, what I call “high school science club management” has pushed aside the traditional methods of generating revenue.
Now policeware and intelware vendors offer podcasts, assuming that investigators and intelligence professionals have the time and interest to listen to marketing information about the latest and greatest in graph generation, analytics, and visualization.
There are experts who want to build their own book and training businesses. In the last three days, I have received a half dozen email blandishments to attend this free webinar or download that list of OSINT tools.
What’s next?
Google online advertising to get me to license Blackdot, Qwarie, and Vesper technology?
Here’s the problem:
There are too many companies chasing available policeware and intelware dollars. Established vendors capture the significant projects; for example, Darpa awarded a hefty machine learning contract to BAE Systems, one of the go-to vendors of advanced technology to defense, law enforcement, and intelligence entities.
But every dominant vendor like BAE Systems, there are dozens, if not hundreds, of smaller firms vying to contract. These smaller firms usually work within the procedures which began taking shape in World War II, largely influenced by countries like Britain and several others.
The new companies appear to support the Facebook- and Google-type approach to business. From move fast and break things to digital misdirection, the approach to generating revenue from LE and intel related products and services is shifting. Forget the low profile, off the radar approach. Today it is big trade show booths, podcasts, videos, webinars, and increasingly Madison Avenue style marketing.
Not surprisingly, the three examples cited in this essay are quite different. Cellebrite is virtue signaling. NSO Group is struggling with a lone wolf action. Banjo is dealing with a founder’s youthful dalliance with distasteful activities.
It is indeed risky to generalize. Nevertheless, something is happening within the policeware and intelware market sector. I cannot recall a cluster of news events about LE and intel service providers which startle and surprise in a triple tap moment.
Is there a fix? I want to be positive. Other firms in this sector have an opportunity to assess what their staff are doing with products and services of a quite special nature. Like the nuclear industry, great management effort is needed on an ongoing basis to ensure that secrets remain secret.
The nuclear industry may not be perfect. But at this moment in time, policeware and intelware vendors may want to examine the hiring, management, and institutional approaches in use for decades.
Regulation may be useful, but policeware and intelware is a global activity. Self-control, ethical behavior, and tight management controls are necessary. Easy to say but tough to do because of the revenue pressure many of these vendors face. Plus, outsourcing means that government agencies often cannot do their work without third party support. There is a weird symbiosis visible today: Funding sources, technologists, enforcement officers, procurement professionals, and managers with an MBA.
Bad actors love these revelations. Each item of information that reveals capabilities, weaknesses, and methodologies helps those who would undertake criminal or deleterious activities.
Unless the vendors themselves button up, the unmentionables will be exposed and flap in the wind.
Stephen E Arnold, April 29, 2020
A Russian System for Citizen Scanning
April 27, 2020
This may simply be propaganda, but it is interesting. Sputnik News tells us Russia is developing a new, frisk-less citizen search tool in its article, “Russian Engineers Working on Total Recall-Style Unobtrusive Screening System.” Under development at a subsidiary of defense contractor RTI Systems, the project should be completed by next year, we’re told. The tool would “discretely” scan people without having to stop them and use AI to recognize objects in real time. The article cites RTI’s Kirill Makarov as it relates:
“The scanning system is envisioned as a ten-meter corridor accommodating three inspection zones. Passing through these zones, a person can be examined remotely, with the computer determining what he or she is carrying or hiding. The system is expected to help authorities scan for carriers of illegal weapons, controlled substances, or other objects. According to the businessman, the institute tasked with creating the system is already in the process of receiving technical requirements from would-be customers, who see the complex’s unobtrusive nature and ability to work clandestinely as huge advantages. ‘At the moment such a thing is not being implemented anywhere else. Only Israel has something similar, but the low resolution with which they’re working does not allow for the use of neural networks for object recognition,’ Makarov boasted. Makarov also promised that between 85-90 percent of the system would be created using domestically-made components. As far as safety is concerned, the businessman pointed out that the complex will be based on non-ionizing radiation, making it safe for humans.
I suppose we’ll just have to take their word for that.
Cynthia Murrell, April 27, 2020
Another Low Profile, Specialized Services Firm Goes for Mad Ave Marketing
April 25, 2020
Investigative software firm ShadowDragon looks beyond traditional cyber-attacks in its latest podcast, “Cyber Cyber Bang Bang—Attacks Exploiting Risks Within the Physical and Cyber Universe.” The four-and-a-half-minute podcast is the fourth in a series that was launched on April second. The description tells us:
“Truly Advanced Persistent attacks where physical exploitation and even death are rarely discussed. We cover some of this along with security within the Healthcare and Government space. Security Within Healthcare and government is always hard. Tensions between information security and the business make this harder. Hospitals hit in fall of 2019 had a taste of exploitation. Similarly, state governments have had issues with cartel related attackers. CISO’s that enable assessment, and security design around systems that cannot be fully hardened can kill two birds with one stone. Weighing authority versus influence, FDA approved equipment, 0day discovery within applications. Designing security around systems is a must when unpatchable vulnerabilities exist.”
Hosts Daniel Clemens and Brian Dykstra begin by answering some questions from the previous podcast then catch up on industry developments. The get into security challenges for hospitals and government agencies not quite halfway through.
A company of fewer than 50 workers, ShadowDragon keeps a low profile. Created “by investigators for investigators,” its cyber security tools include AliasDB, MalNet, OIMonitor, SocialNet, and Spotter. The firm also supports their clients with training, integration, conversion, and customization. ShadowDragon was launched in 2015 and is based in Cheyenne, Wyoming.
Cynthia Murrell, April 13, 2020
Palantir Technologies: Getting the NSO Treatment
April 24, 2020
Rupert Murdoch’s real news outfit published “Data Firm Palantir Saw Crisis Coming, Still Faces Pain.” If you want the online version, you will have to pay. The dead tree version of the story is on B5 of the April 22, 2020, edition of the WSJ which is sometimes delivered to me in rural Kentucky.
Enough about the real news outfit. I want to run down some of the assertions made about Palantir. Assertions, I wish to add, from anonymous sources or people close to the vendor of intelware, not verifiable sources.
I highlighted these factoids from the article:
First, Palantir does a lousy job of sharing its financial information. How does the Wall Street Journal get its revenue estimate from 2019? How does the WSJ know that $100 million in costs have be removed from the firm’s operating budget? Easy. People “close to the company” and two unnamed “investors.”
Second, Palantir is pulling back from its rumored initial public offering after the November elections. Palantir has pulled back or put off an IPO for many years. But now Covid enters the picture.
Third, Palantir is providing “a single source of truth about the rapidly evolving situation.” The situation is making sense of pandemic data and the individuals who are infected or infecting. This is a contentious issue. High profile publicity like that the NSO Group has experienced is not a sales booster in some cases.
There are some other factoid assertion like rumors in the write up, but I want to address the three points I selected from the WSJ write up.
- With regard to sharing its financial data, privately-held companies are not obligated to share financial data. Palantir does, but it may not be the data investors or employees want to see. Palantir is in the secrecy business, and it is tough for specialist firms to tell anyone anything. This is not something unique to Palantir. Write Blackdot for information. Let me know how that goes, please.
- The pullback from an IPO is nothing new. Palantir took shape in 2003. Let’s see. That’s almost 17 years ago. If the firm were in a position to crank out those facing IPO documents and go through the stellar Securities & Exchange Commission process and then hit the road to chat up the market makers, Palantir and its big money backers would have volunteered to drive the minivan from meeting to meeting. There’s a reason why the Palantir IPO is unlikely to happen. Hypothetically the company is concerned about revealing data. Another hypothetical is that companies selling policeware and intelware are not loved by some investors. Check out Verint, please. How much information does the company actually provide about its specialized services? Yeah, about as much as Siemens.
- Third, Palantir pitches the single source of truth idea. But that’s marketing, and it is not a tagline that makes potential buyers say, “Hey, I get it.” To make a Palantir-type sales takes time. The reason is that there are not as many customers for these specialized products as some people like high-flying investors assume. Palantir is more than 15 years old, and Herzliya, Israel is chock-a-block with start ups that are spry, hungry, and equipped with better-faster-cheaper specialized solutions. The sales problem is baked into the specialized software sector. Not even IBM can keep some cyber intelligence sheep in line. South Africa selected an intelware vendor from Poland, not the once proud nation of Big Blue.
So what?
From DarkCyber’s point of view, the Wall Street Journal could dive into more substantive aspects of Palantir and actually identify where the information originates. Even middle school students have to provide a footnote even if it is to Wikipedia. That may garner a C. But no verifiable sources? That’s nosing into the murky land of failure.
Stephen E Arnold, April 24, 2020
IBM Suffers a Setback in South Africa: Datawalk Stomps on Big Blue
April 21, 2020
IBM Analyst’s Notebook at one time enjoyed near total market dominance for investigative software, what I call policeware. IBM owns Analyst Notebook, and it has a sustainable revenue stream from some governments. Once installed — even though there may be no or very few qualified operators who can use the system — the money continues to roll in. Furthermore, IBM has home-grown technology, and Big Blue has acquired smaller firms with particularly valuable technology; for example, CyberTap.
Maybe not in South Africa? Datawalk has strolled into the country’s key integrator and plopped itself down in the cat-bird seat.
Under the original i2 founders’ leadership, losing South Africa was not in the game plan. IBM may have misplaced the three ring binder containing the basic strategy of i2 Ltd. To make matters worse, IBM could have asked its Watson (right, the super smart technology tackling cancer and breaking its digital ankle in a wild play) about the South African account.
Also, affected are downstream, third party products and services. Analyst’s Notebook has been available for more than two decades. There are training and support professionals like Tovek in Prague; there are add ins; there are enhancements which like Sintelix could be considered an out-and-out replacement. What happened?
If the information reported by ISB News is accurate, a company headquartered in Poland captured the account and the money. The article asserts that a key third party reseller doing business as SSG Group and its partner TechFINIUM (a Datawalk partner in South Africa) have stepped away from IBM and SAS. These are, in the view of DarkCyber, old school solutions.
The Datawalk replacement, according to John Smit, president of SSG Group, allegedly said:
“DataWalk is a powerful solution that will allow us to combine all data in one repository and then conduct detailed investigations. We often use unstructured data that we receive from our partners. DataWalk will provide us with the previously unattainable ability to view this data in the full context of our own databases “
Datawalk is characterized as a solution that is “more suited to current challenges.”
According to the article:
DataWalk (formerly PiLab) is a technological entity that … connects billions of objects from many sources, finding application in forensic analytics in the public and financial sectors, including in the fight against crime (US agencies), scams (insurers) and fraud identification (central administration).
These are aggressive assertions. IBM may well ask Watson or maybe a human involved with Analyst’s Notebook sales, “What happened?”
Stephen E Arnold, April 21, 2020
Apple and Google: Teaming Up for a Super Great Reason?
April 21, 2020
In a remarkable virtue signaling action, Apple and Google joined forces to deal with coronavirus. The approach is not the invention of a remedy, although both companies have dabbled in health. The mechanism is surveillance-centric in the view of DarkCyber.
“Google Apple Contact Tracing (GACT): A Wolf in Sheep’s Clothes” provides an interesting opinion about the Google Apple Contact Tracing method. The idea seems to be that there are two wolves amongst the sheep. The sheep cooperate because that’s the nature of sheep. The wolves have the system, data, and methodology to make the sheep better. Are there other uses of the system? It is too soon to tell. But we can consider what the author asserts.
But the bigger picture is this: it creates a platform for contact tracing that works all across the globe for most modern smart phones (Android Marshmallow and up, and iOS 13 capable devices) across both OS platforms.
The write up states:
Whenever a user tests positive, the daily keys his or her devices used the last 14 days can be retrieved by the app through the GACT API, presumably only after an authorised request from the health authorities. How this exactly works, and in particular how a health authority gets authorised to sign such request or generate a valid confirmation code is not clear (yet). The assumption is that these keys are submitted to a central server set up by the contact tracing app. Other instances of the same app on other people’s phones are supposed to regularly poll this central server to see if new daily keys of phones of recently infected people have been uploaded. Another function in the GACT API allows the app to submit these daily keys to the operating system for analysis. The OS then uses these keys to derive all possible proximity identifiers from them, and compares each of these with the proximity identifiers it has stored in the database of identifiers recently received over Bluetooth. Whenever a match is found, the app is informed, and given the duration and time of contact (where the time may be rounded to daily intervals).
The author includes this observation about the procedure:
Google and Apple announced they intend to release the API’s in May and build this functionality into the underlying platforms in the months to follow. This means that at some point in time operating system updates (through Google Play Services updates in the case of Android) will contain the new contact tracing code, ensuring that all users of a modern iPhone or Android smartphone will be tracked as soon as they accept the OS update. (Again, to be clear: this happens already even if you decide not to install a contact tracing app!) It is unclear yet how consent is handled, whether there will be OS settings allowing one to switch on or off contact tracing, what the default will be.
The write up concludes with this statement:
We have to trust Apple and Google to diligently perform this strict vetting of apps, to resist any coercion by governments, and to withstand the temptation of commercial exploitation of the data under their control. Remember: the data is collected by the operating system, whether we have an app installed or not. This is an awful amount of trust….
DarkCyber formulated several observations:
- The system appears to be more accessible than existing specialized services now available to some authorities
- Apple’s and Google’s cooperation seems mature in terms of operational set up. When did work on this method begin?
- Systems operated by private companies on behalf of government agencies rely on existing legal and contractual methods to persist through time; that is, once funded or supported in a fungible manner, the programs operate in an increasingly seamless manner.
Worth monitoring this somewhat rapid and slightly interesting tag team duo defeat their opponent.,
Stephen E Arnold, April 21, 2020
Intelware/Policeware Vendors Face Tough Choices and More Sales Pressure
April 20, 2020
The wild and crazy reports about the size of the lawful intercept market, the policeware market, and the intelware market may have to do some recalculations. Research and Markets’ is offering a for fee report which explains the $8.8 billion lawful interception market. The problem is that the report was issued in March 2020, and it does not address changes in the financing of intelware and policeware companies nor the impact of the coronavirus matter. You can get more information about the report from this link.
As you know, it is 2020. Global investments have trended down. Estimates range from a few percent to double digits. Now there is news from Israel that the funding structures for high technology companies are not just sagging. The investors are seeking different paths and payoffs.
“Post Covid-19, Exits May Seem Like a Distant Dream But Exercising Options May Become Easier” states:
With Israeli tech companies having to cut employees’ salaries by up to 40%, many have turned to repricing stock options as a means of maintaining their talent.
Repricing means that valuations go down.
Gidi Shalom Bendor, founder and CEO of IBI Capital subsidiary S-Cube Financial Consulting, allegedly said:
You can see the valuations of public companies decreasing and can assume private companies are headed the same way,” Shalom Bendor said. Companies that are considering repricing have been around for several years and have a few dozen employees, so even though an exit is not around the corner for them it is still in sight, he explained. “In some cases, these companies have even had acquisition offers made, so options are a substantial issue.
Ayal Shenhav, head of the tech department at Israel-based firm GKH Law Offices, allegedly said:
Pay cuts and the repricing of options go hand in hand.
Let’s step back. What are the implications of repricing, if indeed it becomes a trend that reaches from Israel to Silicon Valley?
First, the long sales cycles for certain specialized software puts more financial pressure on the vendors. Providing access to software is not burdensome. What is expensive is providing the professional support required for proof of concept, training, and system tuning. Larger companies like BAE Systems and Verint will have an advantage over smaller, possibly more flexible alternatives.
Second, the change in compensation is likely to hamper hiring and retaining employees. The work harder, work longer approach in some startups means that the payoffs have to be juicy. Without the tasty cash at the end of a 70 hour work week, the best and brightest may leave the startup and join a more established firm. Thus, innovation can be slowed.
Third, specialized service providers can flourish in regions/countries which operate with a different approach to funding. Stated simply, Chinese intelware and policeware vendors may be able to capture more customers in markets coveted by some Israeli and US companies.
These are major possibilities. Evidence of change can be discerned. In my DarkCyber video for April 14, 2020, I pointed out that Geospark Analytics was doing a podcast. That’s a marketing move of note as was the firm’s publicity about hiring a new female CEO, who was a US Army major, a former SAIC senior manager, and a familiar figure in some government agencies. LookingGlass issues a steady stream of publicity about its webinars. Recorded Future, since its purchase by Insight, has become more vocal in its marketing to the enterprise. The claims of cyber threat vendors about malware, hacks, and stolen data are flowing from companies once content with a zero profile approach to publicity.
Why?
Sales are being made, but according to the DarkCyber research team the deals are taking longer, have less generous terms, and require proofs of concept. Some police departments are particularly artful with proofs of concepts and are able to tap some high value systems for their analysts with repeated proofs of concept.
To sum up, projections about the size of the lawful intercept, intelware, and policeware market will continue to be generated. But insiders know that the market is finite. Governments have to allocate funds, work with planning windows open for months if not a year or more, and then deal with unexpected demands. Example? The spike in coronavirus related fraud, misdirection of relief checks, and growing citizen unrest in some sectors.
Net net: The change in Israel’s financing, the uptick in marketing from what were once invisible firms, and the environment of the pandemic are disruptive factors. No quick resolution is in sight.
Stephen E Arnold, April 21, 2020
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