TrustMeSecurity.com

The following article appeared in the April 10, 2007 edition of the Telegraph-Journal. It is reproduced here, unedited except for some web site addresses, with the permission of the Telegraph-Journal.

Finance Investment will help Moncton firm market its secure e-mail software

NATHAN WHITE
TELEGRAPH-JOURNAL

A Moncton-based Internet security company says it has raised funding from a record number of angel investors.

According to Elisabeth Rybak, president of VE Networks, Inc., nearly 250 angels are on board as the company is actively commercializing its TrustMe software.

TrustMe is an e-mail security program that works with existing e-mail accounts. It allows users to send encrypted messages and view such messages from selected people.

“What a lot of people don’t understand is that sending regular e-mail is like sending a postcard through the mail,” explained Rybak. “We put that postcard in an envelope and only let the person you’ve designated as recipient look at it.” Average consumers can download TrustMe for free from the company’s website, [www.trustmesecurity.com]. The company makes its money selling enterprise license fees, which allow companies to set up multiple users and manage settings within their network.

Rybak is one of three former CEOs on the management team, joining CEO Brian Flood, who was founder and CEO of Q1 Labs Inc. and chief technology officer Ryan Croom, who was founder and CEO of CyberSecure Inc.

Rybak, meanwhile, co -founded Whitehill Technologies, Inc., which has grown into Canada’s fifth-largest privately held software company.

VE, which started in 2005, lists Assumption Life and the provincial government among its more than 50 customers.

Rybak refused to discuss the company’s revenue potential, saying only “we think the company’s going to do very well.” She said the roughly 250 angels have invested in convertible debentures, which can later be converted to equity.

She did not reveal the identities of any of the investors, most of whom she said are from Atlantic Canada. She estimated that more than three-quarters are New Brunswickers.

“They’re very prominent businesspeople for the most part. Entrepreneurs, CEOs, businesspeople that we’d all recognize,” she said.”It’s pretty well the who’s who.” Angels are investors that help fund companies past the early stages. The socalled “valley of death,” a lack of funding sources between $200,000 and $1.5 million, consumes the vast majority of companies before their products make it to commercialization.

According to the New Brunswick Securities Commission, only one in 300 businesses crosses the valley and becomes publicly traded. The success rate is one in seven on the other side of the valley, more than 40 times better.

Many observers have cited a lack of angel investment as a major problem with New Brunswick’s capital markets. It was among the topics discussed at the recent Full Sail Summit in Moncton.

But Rybak says VE’s success is evidence there’s an appetite for angel investment in the province.

“We’re excited and proud of getting these angels together. I think it’s just fantastic that level of community support, I really do. I think it’s an indication of how people feel out there and their faith in New Brunswickers,” she said.

“It can be done. It’s obvious the appetite’s there and these businesspeople within New Brunswick want to see New Brunswick businesses succeed,” she said, adding that she feels a responsibility to prove the investors’ faith isn’t misplaced.

“We want to make sure, not just that they get a good return on investment, but we need to prove to them that this can be done,” she said. “We hope that we’re not the first and last company to go out and raise money in this fashion.” The recent provincial budget included changes to the Small Business Investor Credit, which is designed to reward investors who put their money in New Brunswick companies.

The three proposed changes include raising the maximum investment for the 30 per cent credit to $80,000 from $50,000, which in turn increases the total credit available to an investor to $24,000 from $15,000.

The government also intends to broaden the type of shares covered in the program to include convertible and preferred shares. Businesses that qualify for this assistance would be allowed assets worth $40 million, up from $25 million.