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Crossing the Pond? Read this first...

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21st Jun 2005
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AccountingWEB speaks to BeCrypt CEO Peter Jaco about the merits and perils of setting up shop in the United States - from his personal, and to date, fortunate, experience

For many small businesses, keeping a hold on one sphere of operations is a tough enough task. Few relish the thought of crossing the Atlantic before they've established firm roots in their native soil. But BeCrypt chief executive Peter Jaco was itching to spread the company's wings well before it was fledged in the United Kingdom.

BeCrypt creates specialist encryption products for the banking, pharmaceuticals and insurance industries. But the company's strength is in providing products for particularly for government - largely military, defence, or security clients. This isn't the easiest sector - and there's a critical Catch-22 at play. As Jaco says, "gaining the right credibility and trust means knowing exactly what the client's requirements are - and that means gaining credibility and trust."

There are, he says, "no shortcuts'it's a specialised sector and you've got to be prepared to play the long game."

Though employing only 28 people, the company has offices in Reading and London, has a five-year contract with the Ministry of Defence, and contracts with more than 45 police forces in the UK.

But according to chief executive Peter Jaco, the home turf was always just a stepping stone to the United States. "A presence in the United States was part of our strategy from the very start. We've been working on our US launch for over four years." Even from the outset, the knowledge that the United States' spent $2 trillion was a prime motivator.

What BeCrypt has managed to pull off is no mean feat - being supported by and selling to the United States security establishment - despite its institutional and instinctive wariness of outsiders. BeCrypt has become the first company to join the Chesapeake Innovation Center (CIC), a business incubator which describes itself as "focused on technology for the homeland security and defence sectors" and which receives funding from both the National Security Agency (NSA), and a local body (local to Chesapeake bay) the Anne Arundel Economic Development Organization.

Jaco says that, surprisingly perhaps, while there's a wealth of encryption innovation in the United States, they've found their metier in this particular niche - the strongest 'competition' being from other European companies - some of which are also being given a hand by CIC, which, he says, has in return for a small equity, been "invaluable" in its assistance.

The company began life in the United Kingdom without resorting to VC funding - relying on self-funding, some seed funding, and management capital. (Jaco himself left a job at Reuters in sales and international marketing to start BeCrypt.) A core part of the strategy was and continues to be to develop good client relationships with defence sector prime contract partners such as Lockheed Martin, EDS, and Accenture.

Jaco says that the US component and contacts of those companies has enable the drive to cross the Atlantic - but its not only the factor: "The Americans are much more engaging when it comes to start-ups. They just do so many things, and there are so many different kinds of support, at start up level that are just not done here. You get access to all sorts of grants, funds, loans, incubators and venture capital that just doesn't happen in the UK."

But he says, he also owes a debt to "our man over there" having had copious support from the Terry Shear, vice-consul of trade, U.K. Trade & Investment at the British Embassy in Washington DC, as well as to a local scheme, the Greater Washington Initiative, the local branch of PricewaterhouseCoopers, and of course, a good lawyer. Was this expensive? "Hm'" says Jaco, "Not too bad. But absolutely essential."

Jaco says the move across was necessary because of the government and security-focused nature of the work - setting up shop wasn't their first exposure to the United States market; BeCrypt already had US government clients - but "long-line business" had its limitations, which, unless overcome, would not allow the enterprise to develop. But despite all the assistance, there are still cultural challenges:

"We're already starting to hire - and doing that is really easy in the United States. The flip-side is that its just as easy for your staff to leave the next day. Typically, there's no notice period. It means that retaining and motivating staff becomes a different exercise to its equivalent in the United Kingdom."

Now, he says, he's now hoping to be employing up to 24 people in as many months, by which time he has "every expectation" of a "multi-million dollar turnover."

As to why the US, and not the European Union: "We do sell products throughout Europe, in Sweden, Germany and Spain. But having a US office meant having a presence that could service one single market - it just isn't like that in Europe."

Jaco's advice to those in a similar position, and thinking of making the leap?
First - general words of wisdom for businesses trying to sell into the security/defence market: Certification is key - BeCrypt's main products, PDA Protect, and Disk Protect products, have been certified by the Communications Electronics Security Group (CESG), the UK Government's Information Assurance facility at Government Communications Headquarters (GCHQ).

And the company has received Federal Information Processing Standards (FIPS) Cryptographic Algorithm Validation Certificates for its Crypto Library from the U.S. National Institute of Standards and Technology (NIST).

The second, less-mind boggling tip is: "play the long game - it takes time to develop credibility."

As far as entering the US market goes, he says, "do your research first - its extraordinary how slipshod a lot of UK companies are when they go to the United States. They are completely unprepared."

The other keys to "getting it right" are to use all available sources of help - including facilities offered by the UK embassy in Washington DC such as the services of the vice-consul for trade, regional development organisations, and local contacts of existing clients.

Sometimes, of course, good advice costs - and no matter how wide, warm and welcoming a lawyer's smile - he'll still be wanting his fee: "If you're setting up shop in the United States, make sure you can afford to do so."

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