Wollongong’s Critical Arc eyes world with $3 million, equity crowdfunding-fuelled raise
A Wollongong-based builder of personal safety systems, Critical Arc, will in July use VentureCrowd's equity crowdfunding platform to fill out a $3 million round intended to build on existing clientele in Australia, Saudi Arabia, the US and UK.
Critical Arc was co-founded in 2011 by engineers Glenn Farrant and Jahmai Lay, who at former employer Honeywell had managed development of the security/surveillance systems for the London Olympics. Critical Arc is now turning over more than $1 million a year from a client base dominated by universities, including nine in Australia, which use its 'SafeZone' app to co-ordinate security personnel and provide emergency response to students.
The company bootstrapped its way to its first client, the University of Wollongong, in 2012 and also received a $50,000 market research grant from the now-defunct Commercialisation Australia.
That research identified a potential global market for SafetyZone, which is cloud-based and, at around $100,000 a year, relatively cheap according to Tarrant.
"We tend to be installed as a complement to existing blue light phones or help points, but then when it comes time to upgrade those, or install more CCTV or sensors, we're an alternative," he says.
The Newcastle-based Hunter Angels and the Sydney Angels liked what Critical Arc’s market research had found enough to fund a $700,000 seed round in September 2013, with Sydney Angels founder Ian Buddery becoming chairman. A further $250,000 came from Commercialisation Australia, which was used to hire a head of sales and marketing, global IP-based sales veteran Robert Christie.
“That was a huge one for us, in terms of levelling the playing field as a start-up entering new markets,” says Farrant.
Christie helped fashion a sales strategy that is for now deliberately focused on higher education.
“Even in markets bigger than Australia, the university scene is small enough for word to travel fast. The UK has passed the inflexion point where its become a self-referring market for us,” Farrant says.
Critcical Arc’s UK-based Europe/Middle East/Africa director, Darren Chalmers-Stevens, also managed the rare feat of an Australian start-up making an IP-based sale into Saudi Arabia.
There, the start-up - in mandatory partnership with a Saudi-owned firm, located through Chalmers-Stevens’ EMEA contacts - has supplied SafeZone to a high-end gated community. It’s offering the app as a service to residents, allowing them one-touch emergency response when they are within nearby bus routes and shopping areas.
The $3 million now being raised by Critical Arc will help it capitalise on further leads in the Middle East and build its nascent US business, where it’s just opened a US office staffed by a contractor whom Farrant describes as a “market entry specialist”. A university in America’s north-east has trialled SafeZone, using it to monitor students while on holiday in the Middle East, and will according to Farrant proceed to becoming a full commercial client.
Farrant is confident that the existing Australian investors will for this $3 million round, “which will be great in terms of convenience and my focus...but we know we’ll have additional investors and once an institution gets involved, we know the clock starts ticking in terms of an exit in the medium term.”
Artesian Venture Partners, which co-invests with the Sydney Angels on its sidecar fund, will also help “fill out” the round by posting CriticalArc’s proposition on its VentureCrowd equity crowdfunding portal in the second week of July.
“The Artesian guys are keen to push it, there’s not a lot of great deals around at the moment and they can see we’ve done a lot with little so far,” says Farrant, who points out Critical Arc’s headcount is still only eight plus two sub-contractors.
“Throw a little fuel on the fire and we could turn this into something really big.”
Competition from multinationals has been kept at bay by the classic “innovator’s dilemma”, says Farrant.
“I’ve seen that firsthand - the big guys just want to focus on their cashcows. We’ve been at this three and a half years and the only competition around the world is from companies our age.”
As published in BRW: