The announcement by Trendit, an Israeli-registered provider of cutting-edge technology for real-time monitoring of crowd behavior, population movement and trend analytics, to raise £4 million (c.$6m) imminently through a new share offering on the London Stock Exchange’s main market could pave the way for an “exit at some stage” over the next few years. It chose London over New York to list as a result of strong investor interest in data analytics firms and the UK’s handy international time zone.
Well, this is the exit game plan if – as Trendit’s board maintains in a weighty 182-page listing prospectus to their IPO – the Tel Aviv-based firm can successfully execute their business strategy and exploit opportunities in the growing Data and Analytics marketing systems market.
This market is one that is forecast to be worth an estimated $11.6 billion (bn) by 2018 according to leading IT research firm Gartner Group. But let’s not forget the Big Data Analytics market too, which is set to experience robust growth according to IDC over the next five years and had been expected to reach a whopping $125bn by 2015.
Trendit’s listing follows two others Israeli tech companies on the LSE’s Alternative Investment Market (AIM) earlier in 2015. TechFinancials Inc. listed in March raising £3.05m with its core product being a binary options trading platform offering, and Adgorithms, which operates in the high-growth online advertising market that raised £27m in June.
The ‘Smart City’ market, which covers energy, transportation, healthcare, building, infrastructure, and governance segments, has been estimated to be worth a cumulative $1.565 trillion (trn) by 2020 according to a Frost & Sullivan report. Another report from MarketsandMarkets has predicted that the global Smart Cities market would witnessed a Compound Annual Growth Rate (CAGR) of 22.5% over the period 2014-2019.
Looking at the gross domestic product (GDP) of nations globally in 2014, this figure would place the market for Smart Cities – of which over 26 are anticipated by 2025 according to Frost & Sullivan – above that of Spain’s GDP – the 12th largest globally. So, hardly a number to turn your nose up at. And, by that latter date it’s anticipated that c.58% or 4.6bn people of the world’s population will be living in urban areas. (Note: Around 50% of these cities will be in Europe (e.g. including Amsterdam, Barcelona and Stockholm) and North America by that point in time).
Until recently Smart Cities were hard to define. But a team at Frost & Sullivan put their collective thinking caps on and published their thoughts in a study titled ‘Strategic Opportunity Analysis of the Global Smart City Market’ (2013).
It defines the term ‘Smart City’ as having or at least reflecting five out of eight ‘smart’ criteria/parameters. These include: (1) Smart governance; (2) Smart energy; (3) Smart building; (4) Smart mobility; (5) Smart infrastructure; (6) Smart technology; (7) Smart healthcare; and, (8) Smart citizen. One can probably now add eco-friendly cities. And, the trend towards Smart Cities will heighten demand for response, storage, multi-energy networks, smart devices as well as new and innovative business models.
This is what plays to Trendit’s touted strengths or at least it should. The management team has experience across Big Data, geographic algorithms and software development. Add to that they lay claim to have invested over 100 man-years of software R&D.
A variety of tech players can be identified that facilitate and maintain such services at present. They include: (1) Integrators (the ‘end-to-end’ service providers) – e.g. Accenture, IBM and Oracle; (2) Network operators (M2M and connectivity providers) – e.g. Cisco, Verizon, AT&T (3) Pure-play product vendors (i.e. hardware providers); and, (4) Managed service providers (third-party providers that oversee management/operation of smart services).
Benny Saban, CEO of Trendit, who has some 20-years experience and is an expert in Big Data analytics products, contends that: “Trendit’s paradigm shifting technology has the capability to truly revolutionise the population analytics market.”
He adds: “Our ability to provide the most accurate and real-time population information puts us at competitive advantage to other market products. The Board believes that Trendit can become the choice provider for corporates and public sector bodies who require such solutions to improve their services.”
Specifically, Trendit’s IPO comprises 72,332,731 shares at £0.0553 each through a Placing of 17,287,523 Ordinary Shares of New Israeli Shekel (NIS) 0.1 at 5.53p per Ordinary Share and an Offer for subscription of £3,044,000 (55,045,208 shares) at the same price.
The company intends to use net proceeds of around £3.72m from the IPO to develop and grow its sales and marketing efforts in developed and semi-developed markets, maintain and invest in its product development and research and development (R&D) teams to nurture tech advancements, strengthen working capital and reduce short-term indebtedness.
Deployment & Case Studies
The company has to date successfully deployed in over 30 projects across a number of territories. Case studies, for example, have included the Czech Republic where the challenge was to monitor in real-time open venue participants at the Prague International Music festival in 2012 and participant profiling, and an urban planning assignment in Austria for a local/regional municipality where commuter patterns and land use profiling was undertaken.
In its domestic market, deployments have involved real-time demographics in relation to a demonstration in Tel Aviv for a national media client and a crisis management assignment for the Home Front Command – IDF. In both the Israeli deployments the value provided was described as including “mitigation of spillover effects” and “effective resource allocation” with real-time analysis.
Of course, it should be pointed out in relation to certain criticisms of smart cities that the high level of big data collection and analytics has raised questions in terms of surveillance especially as it relates to predictive policing.
The revenue model of the company is based on four main sources of income, namely: (1) The sale of new licenses to selected clients able to demonstrate the ability for substantial revenue growth and provide recurring revenue to Trendit; (2) Creating joint venture opportunities with leading global service providers; (3) Positioning the Trendit solution for OEM and/or partnership opportunities (e.g. ‘Trendit Inside’); and, (4) Professional services on Tier 3/4 support levels for Trendit’s partners and customers.
While Trendit has identified a number of what it describes as “likely potential buyers” going forward given that it is “well positioned to grow internationally in its targeted vertical markets” in the coming years, they also reveal “preliminary discussions” with potential commercial partners have been made. For example, it is undergoing evaluation by Huawei and has established preliminary business contact with IBM, Google, Microsoft, Verint and other parties.
That said, the listing prospectus cautions by stating: “However, in order to pursue these opportunities the Company needs to extend its investment in business development – as addressed with the planned use of proceeds.”
At the heart of the Trendit technology is the ‘Trend Engine’, which is divided into several modules and it is responsible for processing the incoming data streams, calculating the incoming data, providing a depiction of the data in real-world terms and providing an estimation of the population based on the analysis.
Specifically, the output of the Trendit platform is used for a variety of applications including national/local government, smart/safe city, law enforcement, intelligence/agencies, disorder management and map & traffic amongst others – for real time, historical trends and accumulative purposes. It is also worth noting that according to the firm that “comparatively few vendors” in its area of business currently offer solutions catering to multiple service providers in a variety of verticals.
With the company acknowledging that there is “no guarantee for business via a single business channel”, it has initiated other business connections to develop other equivalent partnerships. Names mentioned include the likes of IBM, Accenture and Verint.
Clearly, this may not be an investment for everyone given a number of uncertainties and risks, which are outlined in the listing prospectus. But the listing on the LSE will nevertheless provide a greater public profile for the company and put it in the shop window.
Trendit will also have to demonstrate an ability to execute its business strategy and generate profits – the latter being something that has not been materialized in the past few years. But this is a punt on the future and clearly some parties may wish to get a slice of the Big Data and some Smart City action.
This article was written by Roger Aitken from Forbes and was legally licensed through the NewsCred publisher network.