Mako eats America

Mako Networks made a $25 million bet on its new security technology - and it looks as if it's close to paying off as the Albany, Auckland-based company makes big gains in the US. 

Simon Gamble - president of the company's North American operation, revealed more deals when NBR visited Mako's new San Francisco office this week. 

More on that shortly. First, a quick bit of Mako history.

Yellow Tuna, as it was originally known, began life in a Herne Bay flat 13 years ago, co-founded by Mr Gamble and Chris Massam (still with the company today as vice president, client services).

The company started selling firewall (computer network protection) technology in 2000.

It performed solidly, CEO David Farmer tells NBR. Telecom and the Ministry of Health became major customers.

But at the end of the day it was no different from many others in the same market.

The company’s “a-ha” moment came in 2009, when it realised PCI DSS technology it patented in 2003 could be used to protect credit card payment data in an age of increasing online transactions (those initials stand for Security Standards Council Data Security Standard).

The team hunkered down and retooled. Mr Farmer says it spent $25 million to develop its new product. Some of the money from retained earnings, some was borrowed, some came courtesy of the New Zealand taxpayer in the form of a $4.2 million Technology Development Grant in 2011 from the then Ministry of Science and Innovation.

ABOVE: Entrepreneur Bill Farmer joined Mako in 2003 as CEO, a position he still holds today. Farmer is also the largest shareholder with a 26% stake in the company. Gamble, Massam and Dennis Monks (who came on soon after Mako was formed) are the next biggest shareholders with 18% each.

In the process, staff numbers have swelled to around 100 – around half in Auckland, the balance in Manchester, London, Melbourne and US offices.

And along the way it changed its name from Yellow Tuna to Mako after it was decided the security market demanded a more aggressive moniker.

Today, Mako still sells hardware appliances that monitor, filter and protect computer networks, and has cloud-based software to manage them.

But it's the new credit card fraud prevention technology that's its secret sauce. Mr Farmer says Mako is the only networking company with a PCI DSS-accredited product for securing online transactions.

A heavy focus has been on the US market, home of Visa and MasterCard.

The CEO says the years of new product development are now bearing fruit. Six major deals have been signed in the past six months.

One is with Sprint, whose millions of retail and business customers can now purchase Mako’s solution integrated with Sprint’s wireless service to connect, protect, control and secure their data and payment transactions.

The solution also includes built-in Wi-Fi and Mako Guardian content filtering and reporting, in addition to an array of other value-added features, including extensive 24x7 monitoring and alerts to help maintain network security.

Mr Farmer says he expects the deal to be worth “tens of millions” to Mako over the next three years.

ABOVE: Simon Gamble in his office in San Francisco. At trade shows in NZ, "People avoid eye contact at all costs," the Mako President says. "It’s easier here to start talking business to people."

Mako spent its first 18 months in the US at the Kiwi Landing Pad in the SoMa (South of Market) district of San Francisco.

Mr Gamble says the Pad - a co-work space for NZ companies new to the US - was a great way to get a running start in North America, "But you do grow out of it. It's a landing pad, not a crash pad."

In early September, Mako devided it was time to "graduate", and it moved its staff to a new office office is nearby Potrero Hill, where it counts Sega, Zynga and Adobe as neigbours.

Mako now has 14 of its 100-odd staff in the US, spread around the new San Francisco office, and satellites in Memphis, Nashville, Philadelphia and Miami Beach.

“Phoenix Managed Networks was the first channel partner we got on board,” Mr Gamble says. “We’ve got Aperia Solutions, a financial services firm out of Dallas, BullsEye Telecom, a telco headquartered in Detroit but they deploy in all 48 mainland states and we’ve recently signed SpaceNet as well, based out of Washington DC.”

Different doing business in the US
Mr Gamble says doing business in the US is different.

There’s the obvious: “It’s big.” 100 Mako security appliances would be a major deployment for an NZ customer like Z Energy, but it’s nothing to many US clients. Channel partners are need to help configure, ship and support devices on a North American scale.

"Our sales are primarily through the channel, and Sprint are a great channel partner for us," the Mako president says.

But there are a number of others, and the pool is growing. "Phoenix Managed Networks was the first channel partner we got on board,” Mr Gamble says. “We’ve got Aperia Solutions, a financial services firm out of Dallas, BullsEye Telecom, a telco headquartered in Detroit but they deploy in all 48 mainland states and we’ve recently signed SpaceNet as well, based out of Washington DC.”

The sheer size of deals also means things take longer. 

“The type of customers we pick up, and our partners pick up, are pretty large. It’s unusual to do a deployment of under 100 locations,” Mr Gamble says, "Whereas in New Zealand, if you get a 100-site deployment, you’re pretty happy about it."

"When you’re doing an implementation across 8000, 9000 or 10,000 locations there’s quite a long testing procedure and trials and all the rest of it as well," Mr Gamble says. He's been in the US since March last year but it's only in the past couple of months "we've got over that crest and now we’ve got a lot of those big deployments really starting to kick in."

Beyond signing up sales partners like Sprint, deals are also being done with customers. Mako's largest single customer was signed in August - although it can't be named until its deployment starts in the new year.

IPO? Not for now
Is Mako looking at an IPO, here or in the US? "There are all sorts of possibilities we’re looking at," Mr Farmer says. "There’s no doubt the opportunities here are colossal and it costs money to make money. But it's too early to say, we've got to do more diligence."

Leave your Kiwi business attitude at home
The Mako president says being an outsider is no handicap.

"I’m the only person with an American accent here. We’re an American company in America, but people don’t care where you’re from as long as you can deliver. There are people from everywhere in the Bay Area. 

"It's not an advantage or a disadvantage to be a Kiwi."

But you should leave your Kiwi psychology at home.

And here we come the second big difference about the American commercial landscape.

"It’s easier here to be able to start talking business to people," he says.

"One of the analogies I like to use is, if you go to a trade show in New Zealand, Australia or England, you go there and people don’t want to talk to the people in the booths. They walk by and avoid eye contact at all costs.

“Whereas here people go to trade shows to talk business. Everyone’s into it. If you’re at a trade show here and you have a short list of people from 10 organisations and you want to talk to someone from each, if you see someone walking past with a badge form one of those companies you can grab them and say, 'Chris, can I have two minutes of your time?' And they’ll say, ‘Yeah, all right, you can have 30 seconds’. And you can give them your pitch and they say, 'Yeah that sounds really good, here’s my card, let’s organise a meeting next week. I want to learn some more about it.'

“That doesn’t happen in New Zealand. Really, it doesn’t," he says.

“[In the US], if you’ve got a good product, you can get face time with a C-level executive. They won’t give you much time but they will give you some time. That’s generally what happens here [in the US]. It is the land of opportunity. But you’ve got to get off your bum to go and make it.”

Uncapped data changes everything
He also notes a difference on the technology level.

"Here DSL [copper broadband] is common but it’s not preferred. There’s a cable infrastructure that gets you faster speeds. And there’s also quite strong 4G/LTE penetration here that’s pretty high speed and ubiquitous," he says.

"If you get an internet connection here, it’s generally uncapped. You pay depending on how much bandwidth [speed] you want rather than how much data you want to use."

"And that fundamentally changes how you use the internet, because if you’re not worried at all about how much you use there’s streaming video, there’s streaming audio, you can actually use the internet to funnel an awful lot of stuff. Whereas in countries with caps, if you’re streaming training videos all over the show you’re just going to ratchet up you data."

Pledge to stay Kiwi
Despite the US push - and a track record of NZ start-ups grabbing millions in government grants then selling themselves offshore, usually to North Americans - CEO Bill Farmer says he wants Mako to stay a Kiwi company.

"We're 95% owned by Kiwis and we absolutely keep business and jobs in NZ. The guys are very parochial," he says.

ckeall@nbr.co.nz