Friday, June 13, 2008

Safecore finds regulatory focus a winning model

By Christopher Calnan

A little more than a year after Safecore Inc. switched from the data center business to managed services, the Burlington-based company has doubled its number of employees and introduced its second regulatory management application, this one focused on needs of the financial world.

Last month, Safecore launched a virtual data room product designed for customers to share proprietary information. The application is expected to be sold mostly to investment bankers, hedge fund operators and venture capitalists, CEO Stephen Catanzano said. “We’re taking all the due diligence and virtualizing it,” he said.

The new application is another step in Safecore’s model of focusing on serving the regulatory needs of its clients around the world.

In 2007, the company sold its 25,000-square-foot data center in Medford to Pennsylvania-based Expedient Communications Inc. for an undisclosed amount. Safecore, which launched as a consulting service in 2000, had acquired the data center in 2002 from Colo.com, a California-based company.

The data center sale enabled Safecore to shift its business model to managed services, including its first regulatory management application, an e-mail archiving service that launched in 2004. The shift in focus enabled the company to expand with the addition of more international customers, Catanzano said.

“It’s really paid off,” he said. “It’s just allowed us to grow on a global scale at this stage.”

About 10 percent of Safecore’s customers are now based outside the United States, and the new business is fueling growth. The company doubled its staff, now employing 18 workers compared with nine a year ago.

Catanzano declined to disclose the company’s annual revenue, but said Safecore, which has garnered a $3.5 million investment from a syndicate of angel investors, is operating with a positive cash flow.

The size of the e-mail archiving market is projected to quadruple from 2007 to 2010 — from $1.3 billion to more than $6 billion, according to the Radicati Group Inc., a California-based research firm specializing in the messaging market.
Developers of virtual data room technologies include Milford, Conn.-based Perimeter eSecurity, Minnesota-based Merrill Corp. and Canada-based Firmex Inc.

Investor Paul O’Brien, former CEO of New England Telephone and founder of Boston-based telecommunications and consulting firm the O’Brien Group Inc., expects Safecore’s software products to attract larger customers for the company’s overall business during the next 18 months to 24 months.

The O’Brien Group typically invests in telecommunications but the firm has taken a 15 percent to 20 percent stake in Safecore, largely because its business model fills a need for regulatory compliance, O’Brien said.