Mark Gray, Chairman and CEO of Cybergy Partners, Inc., talks with Opportunist’s Managing Editor Leslie Stone about his company’s role in cybersecurity, the smart grid, and renewable energy.
The FBI ranks combating cybercrime one of the nation’s top law enforcement activities. The Center for Strategic and International Studies estimates that cybercrime costs the global economy about $445 billion each year. “Last year cyberattacks rose 40 percent and the dollar damage from cyberattacks and intellectual property theft grew 40 percent as well while solutions only grew by 18 percent,” says Mark Gray. “The Sony hack and cyberattacks on the retail chain Target were two high-profile examples, but attacks aren’t just limited to what we see in the news. This affects everyone: you, me, and the next-door neighbor. More than 90 percent of computers have been affected at some point in time by people gaining banking information or personal data. I believe it is a matter of national security at this point. To put it another way: the next battlefront will not be fought with tanks, ships, and jets. It will be fought on a digital battlefield and it is happening even now as we speak.”
Gray is founder of Englewood, Colo., based Cybergy Partners, Inc., which is committed to building a premier, full-spectrum, assistance and advisory services and products provider to the federal government, state governments, and private clients through its three divisions: New West Technologies, Primetrix, and Cybergy Labs. New West provides clean, smart, and reliable energy solutions and is a five-time winner of the Inc. 500/5000 fastest growing private companies in America. Primetrix serves U.S. government contractor firms with contract procurement, compliance, and growth services. Cybergy Labs is an award-winning developer of specialized cybersecurity software applications. “Our marquee product is SmartFile,” explains Gray. “We have applied for and having pending both U.S. and international patents. SmartFile is truly the Internet of documents because we can connect any digital file or document to the Internet invisibly so that it reports back only to you each time it is opened, viewed, printed, or shared with others.”
SmartFile will be released for consumer and business use this fall. “We built this only for federal government use back in 2011, and this will be the first time it will be made available to anyone who needs to track marketing or sales or who wants to keep a better audit or trail of custody on their documents,” Gray explains. “I think a lot of great useful apps will develop from it, ranging from healthcare to IT, to tracing your medical records and résumé, to increased productivity for small business in sales, marketing, and so forth. The possibilities are endless. I cannot make comments about classified work, but imagine the ability to observe known networks of enemies and adversaries through SmartFile. A goes to B, and B goes to many.”
Opportunist: How is SmartFile unique?
Mark Gray: What’s unique about SmartFile—and there are over 60 other companies that have the capability, the largest being Microsoft, Cisco, and Adobe—is that we are the first to market with document intelligence tools that require no plug-in, download, or special software of any type. No player is required on the viewing computer. That means we can readily work on every version or generation of PC, Mac, and Linux, no matter how old or new. Simply put, SmartFile can work on every functioning computer in the world right now.
Whether SmartFile is tracking your résumé for the job you want, tracking a sales proposal or price quote, or letting you as a sales manager know where the ‘fish are biting’ so you can follow up, it is basically integrating your customer’s buying cycle with your sales cycle. Let’s say you make a presentation for a computer system. It turns out not to be a sale, but six months later SmartFile notifies you that your proposal has been opened multiple times, and you can see that in real time. That might be the day to make that follow-up call. That is the future of information systems or business intelligence. In fact, it’s the future of how the Internet of documents should work.
SmartFile can be of service in the area of government security breaches such as WikiLeaks, the hacking of computers, or the theft of intellectual property for your big idea. Our system can tell you in real time in less than two seconds when someone has removed a file and opened it elsewhere. If you’re a government agency with sensitive files pertaining to nuclear records for power plants, for example, and your files are suddenly being opened in some foreign country, SmartFile can tell you not only from which computer it was accessed but also give you the exact time it was accessed from anywhere in the world. The files report back independently for the rest of their lives whenever they are accessed or used.
The parallel to this occurred in 1985 when caller ID was invented. Consumers paid a certain amount per month to have that feature added to their phone service and it soon became the No. 1 most successful application in the telecommunications industry, reaching a peak of $2 billion per year shared. Today, caller ID is infrastructure. It is how phones work. In fact, you cannot find a cell phone that does not have caller ID. We believe that, managed and distributed properly through the right array of channel partners, SmartFile could do for computing what caller ID did for telecommunications. One day in the future, when you take your tablet or smartphone out of the box, SmartFile or some similar system will probably already be built into the operating system. We have already had requests to build the program into such operating systems. Tools such as SmartFile will help make humans smarter.
Opportunist: How else can the software be utilized in business?
Mark Gray: Let’s say you’re a digital publisher and you make your living publishing financial reports or digital content online. Digital piracy is a big issue. We believe that is an important market we would like to serve, and SmartFile has a huge application in making sure that if someone downloads your big idea they pay for it. But even if you’re giving your big idea away for free, wouldn’t you like to know how broad the audience truly is?
We started thinking of ideas for SmartFile in 2011 and there are now hundreds of uses for it. In fact, our customers keep finding new ways of using it. Back when the Internet was launched, do you think its creators envisioned all the things we would be using the Internet for today? The world of digital documents on your computer is many times larger than the ‘www’ address. The number of digital files produced by computers worldwide is 5.4 trillion megabytes per year. This is an inconceivable number of files. If we printed them out on 8.5 x 11 paper, we probably don’t have enough trees on Earth to make that much paper. That’s a big data project and this is why we say SmartFile is the Internet of documents.
Opportunist: Can you tell us a little about yourself, Mark?
Mark Gray: I have been an investor and operator in companies for 30-plus years. I bought my first company from my college dorm room and sold it two years later for many times what I paid for it. Then I did it again. The next one was a turnaround, although I didn’t really know what that was at the time. After three years I had turned that business around, made it profitable, and sold it. Around that time, I thought I better go back to school to learn what I was doing. [Laughs] Fast-forward 15 years later and I was working on a major M&A deal for Jack Welch at GE Capital that became the No. 1 deal in the history of GE Equity Capital—the buyout of ValueVision at $3.74 cents a share with a market cap of around $99 million, which went to $57 a share and $1.4 billion market cap. Revenue grew from $200 million to about $500 million and that was a very successful business and investment and everyone did well in it. GE Capital gave me a great opportunity to learn how they approach synergy between businesses, best practices, recruiting and how to acquire great companies.
For the last 10 years, I have been involved in the high-tech sector, primarily in the federal government space. People typically think of the federal government as not growing or having budget constraints and constrictions, but in fact, the government is continuing to grow—just not as fast as it spends money. The government spends about $3.4 trillion per year. This makes it the largest customer in the world for every product or service you can legally sell. The government is also a great customer. It pays reliably and if you are in an area such as cybersecurity, intelligence, information systems, healthcare, or other areas where demand is strong or growing, it’s a great business market to be in. A second positive aspect of being in the federal government marketplace is when you deploy a solution to the government, you must be a proven provider that can scale because almost everything the federal government does is on a very large scale. If your people and your system can support a highly-compliant large-scale customer, and you’re a proven commodity in that environment, it translates well to large-tier international customers. We have all of the above in our customer wheelhouse today.
Opportunist: What are your specific duties as Chairman and CEO?
Mark Gray: As Chairman of our board I lead our investment committee. We plan to grow through a disciplined execution of our organic growth and acquisition strategy. There comes a point in the federal government contracting industry we are in when companies reach a certain size—typically north of $30 million to $40 million in revenues—and are considered too large to be a ‘small biz’ business and too small to compete against major Tier 1 brands. Our strategy and vision is to aggregate a minimum of three to five companies of that size into one corporate entity and we are well down the path of doing just that.
When we started having these conversations in Washington, D.C., we encountered numerous companies who felt like we did: too large to be small and too small to be big. So our plan is to join together to make one larger, better equipped company.
Opportunist: What are the benefits of joining forces?
Mark Gray: Back office sharing and cost center savings are one huge benefit because we currently spend about $8 million a year on general administrative costs. The company we plan to merge with next has almost identical back office overhead, accounting, HR, IT, legal, and business development expenditures. Combining our back office expenditures will result in significant savings of $4 million to $5 million per year. That is exciting for us and we see acquiring other talented companies that are growing and profitable who would also like to be part of the Cybergy family of companies.
We have entered into a number of partnerships with the cybersecurity companies ISS, Accellora Solutions, 22nd Century Group, and FireEye/Mandiant, which trades on NASDAQ under the symbol of FEYE. All of those are teaming arrangements and partnerships, whether we bid on or work on contracts together, primarily in the cybersecurity arena.
Opportunist: What is Cybergy Partners’ role in the smart grid technology industry and machine-to-machine communications?
Mark Gray: Our three ‘swim lanes’ or areas of business focus are energy and renewable energy, the smart grid and cybersecurity, and intelligence. Those areas of business intersect in many ways. For example, the electrical grid consists of our power production points and connection points and substations, which includes 100 nuclear power plants— and the source of 40 percent of cyberattacks each and every day. Imagine what could go wrong if bad guys got control of a power plant. Our experience in this realm spans 19 years during which time we have become a trusted source of strategic design, architecture, and new technology, including the work we do for the U.S. Departments of Defense (DoD) and Energy (DoE) at our national labs such as Oak Ridge, Sandia, and Battelle. We have some of the brightest people researching best practices. The energy grid has become the world’s largest computer network connecting our $400 billion industry. Why is that much more important than just money? Because it’s really the fabric that holds our society together. If we lose power, everything we do—from healthcare to pumping gas to using an ATM—is adversely affected.
Opportunist: Please tell us about the company’s New West Technologies subsidiary.
Mark Gray: New West is our anchor company in the energy sector and we acquired it on Jan. 1, 2014. It employs approximately 80 people primarily in Washington, D.C., who are supporting renewable energy and smart grid initiatives, in particular in support of the DoE. We do research and development at DoE’s national laboratories and specifically have programs in wind, solar, and water power, including tidal energy and biomass. In the past we had been working in nuclear energy and its environmental impact, what it does to our carbon footprint and to fossil fuels if society moves to cleaner energies. Our personnel have worked in public policy to write and shape bills that affect our energy policy.
Another category, sort of a hybrid between New West and Cybergy Labs, is our advanced transportation group. We have been doing work for alternative fuel vehicles ranging from electric to hydrogen and even driverless vehicles for both the federal and state governments. In the State of New York we won awards for our advanced transportation design for clean energy boats and barges. We are also heavily involved in research.
Through these programs at New West, we are involved in grants for new innovative technology and tech-to-market, where technology is now fully developed and ready to be commercialized and used. When money is awarded, managers of those grants need someone to monitor how it’s used and ensure that it’s properly administered.
Opportunist: What do you think about President Obama asking Congress for $14 billion to step up cybersecurity in 2016?
Mark Gray: I think the initiative is a good one. The problem of cybercrime is growing and, as I mentioned at the outside, at a rate more than twice as fast as the ways to combat it.
Opportunist: When did data breaches become so prevalent?
Mark Gray: We have seen the development of hacking in stages. Phase one occurred when the Internet was in its infancy. Young kids did a little breaking-and-entering just for fun, and it was more mischievous than anything else. During phase two, hacking developed into individual stand-alone criminal hacking that was well-funded and highly skilled. These people could access bank accounts and do some pretty major hacks. Phase three developed into organized crime, where large groups with network capability around the globe worked together as a team. Phase four is state-sponsored hacking and is often denied. I cannot comment with any level of detail except to say that I am absolutely certain that state-sponsored, military-grade hacking activities are regularly occurring around the globe.
Opportunist: What does Cybergy have planned for the second half of 2015?
Mark Gray: We have reached an agreement to merge mid-year with a company that is top secret-cleared for cybersecurity. It’s about the same size, with another 100 people and approximately $40 million in revenue. The mission behind the merger is to solve complex problems for customers we have today or those we might have together, and we are focusing on our capabilities to be a solution provider, end-to-end for evermore complex problems.
Opportunist: Is there anything you believe potential investors should know about the company?
Mark Gray: We consider our customers and employees family. The highest honor is when someone invests in us and wants to be part of what we are building. Most investors want to buy low and sell high, which is why we are a publicly-quoted company today. We want to find investors to invest with us long term and be part of what we are building for the long haul while doing something to preserve our critical infrastructure for the United States. When people invest here they are creating jobs and technology and greater security and certainty in and for America.
Opportunist: Where do you see Cybergy in five years?
Mark Gray: Next year marks our 20th year in business. When you reach that milestone it gives you a pause to look back and reflect and also a moment to look ahead at the 20 years before you. In terms of our mission, vision, and values, we would like to become the No. 1 trusted partner that our customers can call on their best or their worst day because they know our level of engagement and commitment is second to none.
Leslie Stone is an award-winning writer, editor and journalist with more than two decades of experience covering business, finance, real estate and lifestyle issues for newspapers, magazines and online publications. Originally from Virginia, she currently resides between Florida and Michigan. Follow Leslie on Twitter: @lescstone.