Echosec founders exit successfully and move on to new venture

In April 2019, TIMIA Capital announced a $2 million investment facility for Echosec, a Victoria, BC-based company that develops a web-based data discovery platform for intelligence using social and dark web data. 

In 2021, the founders sold 90% of the company in a successful exit that rewarded its investors and employees. We caught up with Echosec co-founders, former CEO Karl Swannie and COO Mike Anderson, to hear about their journey since we last interviewed them in 2019. 

Echosec’s Growth Path

Karl launched Echosec as a side project in 2014. His web-based data discovery platform helps organizations detect online data for threat intelligence by aggregating and mapping content from hundreds of sources including social media, blogs, news, and the Dark Web.

Sir Terence (Terry) Matthews, a Welsh-Canadian business magnate and early Echosec investor, commissioned Echosec to secure the 2014 NATO summit which was held at one of his properties, the Celtic Manor Resort, in Wales. The event was groundbreaking for Echosec and gave them a platform from which they’ve continued to grow.

Non-Dilutive Capital for Valuation Growth

Echosec’s founding team comprised a group of engineers who were passionate about building a great product. The team was technically very strong, but in the early years it lacked equivalent sales and marketing expertise. So while the product was extremely robust, revenue numbers were not where the team wanted them to be by 2019. 

Because of this, the team recognized that they would not get a fair valuation if they went out to raise equity at that time. Instead, they engaged TIMIA to access the cash they needed to make strategic investments to drive revenue, improve SaaS metrics, and grow Echosec’s valuation—without diluting ownership.

Investing in Sales and Marketing 

With the initial disbursement from TIMIA, Echosec hired an entire sales team to target the markets they needed to break into.

“For the first time, we took a dive into being less EBITDA-positive than we were before. However, we had a fairly concrete thesis and were confident our strategy would work out,” said Mike. Everyone at Echosec was aligned with the direction and the team shared metrics widely to keep everyone informed and accountable.

Improving SaaS Metrics

When Echosec began working with TIMIA, it was already on top of its SaaS metrics. However, it had nothing to benchmark against to identify where improvements could be made. TIMIA provides its entrepreneurs with an analysis dashboard that anonymizes portfolio company data while highlighting where each individual company stacks up against the others. 

“We really had no idea where we ranked as a startup. I love how TIMIA gave us an idea of where we stood against everybody else—no other investors do that,” said Karl.

“TIMIA’s dashboard provided enormous validation that we were doing some things really well. It also highlighted areas needed to improve. TIMIA also connected us with entrepreneurs who provided additional insights that helped us make small changes to move certain metrics in the right direction,” he added.

The Unexpected Exit

In 2021, the team’s metrics and revenue had improved to a point where it decided to raise some equity to double down on efforts in the markets where it was performing. It originally intended to sell approximately 10% of the company.

“We put everything into a diligence folder to shop around for an equity raise, which is similar to what you’d prepare for a sale—investors can see everything about your company,” said Karl. 

Since Echosec was an intelligence company, it was experiencing tremendous growth during COVID-19. It was really attractive to investors and one investor made an offer to purchase 90% of the company.

It took approximately six months for the sale to finalize and during that time, the company’s revenue continued to grow.

“The business was going so well and we were driving up MRR (Monthly Recurring Revenue) so we wouldn’t have minded if the deal had fallen through,” said Mike.

Mike and Karl can’t speak about the specifics of the deal due to confidentiality agreements. However, they were extremely happy with the outcome as it provided enough money to pay investors back, reward employees, and provided the funding for Mike and Karl to create another startup.

Great Outcomes for Everyone

Since the Echosec founders had largely taken non-dilutive capital, they were in a great position for the exit. They retained a lot of value in the business so the exit didn’t only affect the founders—it affected the whole team of 35 people.

“If we had taken on equity, we would have had to grow to $100 million in revenue before we could exit at the value the investors wanted,” said Mike.

Big exits seldom benefit the employees to the extent that Echosec’s modest exit did. Karl and Mike joke that the decision to take TIMIA’s non-dilutive capital was the number one reason for the housing boom in Victoria, since many Echosec employees used their stock options for down payments on property. 

“These kinds of exits don’t happen very often in Victoria or Vancouver. I’ve got lots of shares agreements sitting in my filing cabinet that are worth nothing. It was so good to see employees make life-changing money on the exit. Bringing on TIMIA was a great decision for all of us,” said Karl.

What’s Next for Echosec’s Founders?

After taking just one month off post exit, Mike and Karl reconnected and began work on their next venture.

“We could have easily retired and taken out our fishing rods every day. But we want to do this again. The fun part for us is not the money—it’s growing the team, developing the product, and building all the other pieces that go into the creation of a great business,” said Karl.

Their learnings from Echosec put them steps ahead of first-time founders. They know who they want as their lawyers, bankers, accountants, investors, and so on. They also know the technology space and the sectors that are attractive to investors. 

Mike and Karl’s new venture, Intlabs, and a new data governance solution (code-named Clearance) will enable large scale data management and transformation. By fusing millions of items daily across SIGINT, IoT, APIs, spatial data, and proprietary information, their solution aims to transparently layer comprehensive attribute-level access controls, data provenance, and data snapshotting to analysts’ existing workflows—integrating into established toolkits and providing no-code/low-code access to usable formats like csv, json, and shapefiles.

“We’re looking for angel investors to begin with—it’s good to have other people on board. And I’m sure we’ll be working with TIMIA again when the time is right,” said Karl. 

Karl and Mike’s experience building a business with non-dilutive capital sets them up for success with their next venture. They’ve already built one capital-efficient business and will take lessons from that experience into Intlabs.

“I never worried about TIMIA. I would do this deal a million times again because it was just so straightforward and transparent. Mathematically, it just made sense,” said Mike.

We look forward to working with these awesome founders again in the future and wish them all the best with Intlabs.

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