Communitech photo: Anthony ReinhartView from the ‘Loo: Magnet Forensics poised to tackle ‘billion-dollar market’ Anthony Reinhart May 29, 2014 Communitech, View from the ‘Loo Photo: ‘We’re creating this platform that can take that raw data and make sense of it’: Magnet Forensics CEO Adam Belsher. Five years ago, Jad Saliba was a Waterloo Region cop with a knack for programming and a desire to use it to catch bad guys. Today, the company he founded – now called Magnet Forensics – is running out of office space in downtown Waterloo, with 40 employees, zero outside funding, a global customer base and revenue in the double-digit millions. The rocket ride began in 2011 after Saliba decided to stop giving away his specialized data-recovery software, called Internet Evidence Finder, for free to other law enforcement agencies. He left policing and jumped into entrepreneurship, teaming his technical prowess with the business smarts of Adam Belsher, a former executive with Research In Motion (now BlackBerry). The pair haven’t looked back since. With Belsher at the helm as CEO, fast-growing Magnet now stands poised to capitalize on what Inc.com recently called “a billion-dollar market in the making,” as the Internet of Things adds billions of connected devices – each one a potential source of forensic evidence – to our daily lives. I sat down to catch up with Belsher this week in the company’s fifth-floor offices on King Street South, which he might soon have to vacate and sublet when it reaches its fire-code capacity. The last time we spoke, just over two years ago, he and Saliba were the only employees of what was then called JADsoftware. Q – Can you give me a quick update on the company? A – Magnet was founded in 2009, and at that point it was one employee, the founder, Jad. I joined in 2011, and in 2012 we hired our first employee. Currently we’re at 40 employees. Revenue went from hundreds of thousands of dollars to double-digit millions this year. We’re profitable and haven’t taken any external investment to date, but are considering for the future. We moved in here in October of 2012, and I think we were 20 people or so. We’re at fire code at 47, so we really can add only another seven in this location. Q – Where does Magnet sit among competitors in the global field of digital forensics? A – There are a few companies that do a subset of what we do, around web browser forensics, for example – Chrome, Internet Explorer, Firefox and things like that – that focus specifically on recovering data from those types of applications. There are other niche companies that will recover two or three different types of chat applications. There is really only one player, that’s based in Russia, a small private company, that actually closely resembles our feature set. Our real claim to fame is that we get the deleted data. There are companies that can get stuff that’s found in a file or in a folder and recover that data because it hasn’t been deleted, but the core of our IP and capabilities is how you get the deleted data. Once it’s deleted, it’s messy. It’s in places on a hard drive that aren’t well known, and you actually have to take those different fragments of data and pull them together to see what the original data looked like, or at least a piece of it. We get a wide array of different types of artifacts, so we support 450 different types, whereas somebody else will say ‘I support the five browsers.’ We support a lot of different artifacts and applications, and we support them across tablets, computers and smartphones, so we’re cross-platform and cross-operating system – Mac, Windows, Android, iOS – and then we get to the real nuggets of potential evidence, which is the deleted stuff. The bad guys are trying to cover their tracks, so a lot of the key evidence can be found in the deleted data. Q – Back to the bad guys, I noticed you offer a lot of detailed information on your website about where evidence might reside on a device. Doesn’t this help criminals cover their tracks? A – For us, there are three core elements: Helping people fight crime, and that’s typically law enforcement and government; helping corporations protect their assets, so they can track down people who are trying to leak intellectual property or deal with a data breach; and the third pillar is helping guard national security, so we work with various intelligence customers that are dealing with terrorism and things like that. The way we go to market and generate content is through use cases. So, if you’re doing a child exploitation investigation, here are the things you should look for, here’s where you can find them (in fact, we’re doing a webinar this week on that). If you’re doing an investigation around intellectual property theft, here are some of the different kinds of data that get left behind. Our goal is to become thought leaders, so we spend a lot of time on content creation and creating these use cases. It’s less about, ‘Hey, our product is great and here are all the things it does.’ It’s more like, ‘Here are the things you may be doing in your job; let us tell you what kind of data can be really important,’ and at the end we kind of say, ‘Here’s the product.’ It’s about how to become the thought leader in the space, and to do that, I think you have to give them enough to educate them without giving away your secret sauce. You’ve got to give them enough that it kind of hooks them in, where they say, ‘These guys really know what they’re talking about, and if they know what they’re talking about on the subject matter, chances are their product can probably do what they say, because they understand the use case.’ We typically don’t put stuff in there that we consider intellectual property. Q – Why has thought leadership become so important, in addition to having a good product? A – There’s just so much noise in the market today, with everything from direct email coming at you to video marketing to social media, and a lot of it’s geared around, ‘Here’s my product, here’s what it does.’ I think the companies that are doing well are spending time on that whole inbound marketing idea, where you create the content and let people find you. So you make sure you’re creating stuff that’s relevant, that people are searching for. There’s a bit of strategy in creating the content that people are searching for, but it’s giving them something that’s educational and valuable, rather than the product pitch. Tell a story. Q – What factor more than any other explains Magnet’s ability to grow without having to take on debt or outside investment? A – I really credit Jad. Early on, his overhead was low because he was living at home and basically created a product and gave it away for free. It solved a specific pain point, and that created a bunch of momentum and goodwill that allowed us to eventually start charging for it. So it was ‘create something that solved a real problem.’ He didn’t go and raise a bunch of money and hire 20 people, but it was about determining, is there a market opportunity for this? What value does it bring to the customer, and what is that value, and how do you monetize it? From then on, I would say having a great product and great quality is a big thing. We, unlike other startups, were pretty balanced in terms of R&D and sales and marketing. In some companies that are very engineering-focused – and at a certain point, you need to be; you need to be MVP (minimum viable product)-ready – you see a lot of companies that lag in sales and marketing. It’s kind of like, ‘If we build a great product, people are going to buy it,’ but there’s a lot to be said for getting some great marketing so you know how to position a product, and which markets you’re going to go after, and what’s the value proposition, and getting people out there and knocking on doors. It’s that healthy balance between R&D and the front end of the business to generate revenue, and we’ve kind of forced ourselves to say, ‘We’ve got to generate revenue to make sure we can pay the salaries.’ We want to be in a good position where, at the point we take funding, we’re in a great negotiating position, by focusing on the top line and driving profitability. You have to make really tough decisions because you don’t have $5 million or $20 million in the bank. This year, we had to scrap a specific product we were building, and we’d invested a bunch of R&D resources. But my feeling is, if we’d had more money in the bank, we probably would have blown through a bunch of money to get some traction, and my gut said the product was too early. It forces us to be really disciplined about what’s the market opportunity; who’s going to buy it; what are they going to pay for it; what’s the competitive landscape; is there IP we need to be concerned about. On the flipside, we also don’t feel that we’ve missed opportunities because we don’t have a nice war chest where we can say ‘we want to hire 20 people’ or whatever. My feeling is, even if you have a bunch of money in the bank, you only can absorb so many people into your organization at a certain rate. Having gone through that in 2012, when we hired a lot of people, it’s really hard to get people up to speed, to get people who fit your culture. Q – Inc.com recently called digital forensics “a billion-dollar market in the making,” and said the Internet of Things will be a big factor. How does Magnet plant to capitalize on this? A – Today we get data from smartphones, tablets and computers, and we want to also be able to analyze and recover data from multiple devices. That could be your Nest thermostat; that could be your Fitbit; that could be your connected car with GPS co-ordinates and infotainment stuff, and then I would just add general, connected devices. That could be machine-to-machine data. Cisco says by 2025 there will be 50 billion connected devices, and in 2013 there were something like 14 billion. So it’s huge, the amount of data. From an investigative perspective, you can imagine someone going through their day – they wake up in the morning and their coffee maker knows what time they got up; they go to their fridge and open it up and there’s a time stamp on when that person opened the fridge; the Nest thermostat understands when they’re home and not home; they get in their car and you have their GPS co-ordinates. As somebody goes about their day, it’s like a passive application; you’re on your Fitbit and it’s collecting a bunch of data, and you’re just doing things throughout your day and generating this massive digital footprint that you don’t even know about. It’s not like email where you have to be active, or social media. A lot of the IoT stuff is passive, so people don’t even realize what kind of data they’re generating. Our goal is, we’re creating this platform that can take that raw data and make sense of it. It’s like turning information into intelligence, or data into information. It’s basically, how do you harness shitloads of data and put it into an engine? Q – Does it creep you out a bit, just as a person, that the machines appear to be taking over? A – I know there’s a lot of stuff, especially in the U.S. with the Snowden stuff and all the NSA collection activity and things like that, and I know a lot of people are up in arms around privacy, and different people have different views. At the end of the day, people have to realize that if they’re doing something online, or with some kind of connected device, that you’ve got to assume that whatever you do, somebody can either see that, read that, recover that. Don’t put anything out there that you don’t want the world to know, because it’s possible people can get it. People are using encryption and things like that, but the problem with a lot of those technologies is, they’re not really optimized for performance. Look at people who are using any of the Google services; they’re collecting metadata on what people are doing. I find that the majority of people will sacrifice privacy for convenience. Google Now is a great example. You’re on Google in your house, and you’re mapping out your route to your next appointment, and you have an Android phone. As soon as you get into your car, it pulls up your mapping application on your Android phone and says, ‘Do you want to take this route?’ It’s just so well-integrated, and I think a lot of people like that convenience. Q – Is there an investigation involving by Magnet software that stands out as the most gratifying for you? A – There’s been a bunch, and I don’t know if this is in the public record, so I’m not going to give specifics. But there is some stuff we’re waiting on that will hit the transcripts of the court case, hopefully soon. If you think back to the last 12 months, and you think to different types of terrorism-related incidents in the U.S., specifically – and I would say mass shootings, as well – we’ve been involved in those types of cases. In a couple of them we’ve been really pivotal in the prosecution, in terms of the data that we found. More generally, probably every couple of weeks, we get an email, typically from someone in law enforcement, that says, ‘Because of your software, I was able to get a conviction of this pedophile.’ One said, ‘We originally didn’t have enough to go on and he was going to get five years, but we found all this child pornography and they guy is getting 40 years.’ We’ve seen that degree of magnitude in terms of sentencing, which is pretty gratifying. The stuff that really hits home for a lot of us, especially those of us who are parents, is the child exploitation stuff, where you help them catch a pedophile or help a child who’s being abused by family. Those are the ones that really pull on the heartstrings and kind of keep us going. We’re involved in corporate ones, but they’re less personal. Somebody’s stealing confidential information, or there’s some kind of HR misconduct or whatever. Homicides, terrorism-related stuff, a lot of fraud-related cases – at the end of the day, almost every investigation has a digital element. Even if it’s something like a burglary, there’s a chance that somebody did some research on their computer before they did that, whether they were trying to look at the location, or were using Google Maps or satellite or whatever. There’s literally almost no investigation that doesn’t have some kind of digital element to it, which positions us in a really interesting kind of perspective. Q – What has Magnet gained from starting and staying in Waterloo Region? A – I think a big part of it is the engineering and software development talent. That’s a really great reason to be here. I would say the other thing is, I do really believe that Communitech and the ecosystem have really helped, whether it’s bringing in industry thought leaders, providing mentors for new startups, connecting startups to fundraising. It’s really packaging up a bunch of the things that, as a new company, you need to think about, and offering different sessions on whether it’s intellectual property, or patents, or how you raise money, or how you use social media to market your product. I think what’s unique is that Communitech takes that kind of role and ownership to pull all those resources together; to harness all those resources. I kind of call it the glue. That’s a big reason why we’re still in Waterloo, because there’s the support, there’s the ecosystem, and Communitech has helped raised the profile of the community, especially after BlackBerry’s downturn, which is really, really important. If this were other parts of Canada, it would be a hard thing to keep people anchored here. The cost of living is fairly reasonable in the community, so being here gives you a great quality of life at an affordable price, with access to talent. And for the most part, you don’t feel like you’re missing out on something. There’s the Valley syndrome, where people say ‘we’ve got to be in the Valley.’ I’ve done business there; I’ve never lived there, but I really have no desire [to be there], or feel I’m missing out on something. I’m sure there’s a certain pace there; there’s a lot of networking and things like that, but I think Communitech does a pretty good job of bringing those people from all over the world to the community, and you can hear right from them, with private sessions and all of that. Like Geoffrey Moore at the Tech Leadership Conference; that’s awesome. Q – What do the next 12 months look like for Magnet? In general, we’re going to be able to support more different types of data sources; we’re going to be supporting more platforms in terms of devices and operating systems, including the Internet of Things, like getting data off your Google Glass, for example. So, more devices, more applications, and then more focus around analytics – how do you make sense of the data? You get all this data, then you get the deleted data, and you’ve got it in tables and spreadsheets. But how do you take that and wrap it visualization around it? How do you create relationships between the data? At the end of the day, investigators only have so much time, so how do you get them to the relevant stuff, or how do you paint the picture for them so that they don’t have to go through 200,000 records of Internet Explorer history? How do you get to the stuff that really matters? Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.