Martello's Debut

Read Time ~8 Minutes

Todd Coupland , Amy Dyck - Sep 11, 2018

Optimizing Network Performance


One goal of our Technology and Innovation blog is to expose our readers to emerging technologies, companies and their founders and leaders.  We recently met with Martello CEO John Proctor. Proctor also presented at CIBC’s Ottawa Technology and Innovation Tour of Ottawa on August 16, 2018, and Martello Technologies was previously featured in our ‘Emerging Tech In 2018’ report. 


Our discussion on Martello Technologies was timely, as its shares are set to commence trading on September 12th, 2018, on the TSX Venture Exchange under the symbol “MTLO.” Martello is Ottawa’s first technology company to go public in three years. The company completed a reverse take-over transaction (RTO) on August 16, 2018. 


Martello has interesting technology, innovative products, and a growth plan to help disrupt traditional enterprise networks. In this blog we discuss Martello’s technology and innovation, market opportunity, and strategy which motivated the company to list on a public exchange now.


Martello’s products help optimize bandwidth and network performance, and manage the performance of unified communications on enterprise and cloud networks. Enterprise networks are increasingly strained due to the growth of services that compete for bandwidth. Martello looks to leverage the trend away from hardware-centric static networks to software-defined wide area networks (SD-WAN). This trend is happening because of traffic growth from video, application growth in the cloud (like Salesforce and Office 365), and the explosion of mobile users, including next generation Internet of Things.


The opportunity including enterprise optimization in networking - specifically with SD-WAN - is large, and widely expected to exceed USD $1.1 billion by 2021, according to Gartner. Cisco clearly agreed, with its acquisition of Viptela for USD $610 million in August 2017. VMWare made a similar move by acquiring VeloCloud for USD ~$450 million at the end of 2017.  


While smaller then these peers, Martello has a competitive ‘niche’ product and service offering that optimizes networks for voice and other real-time applications. It is also important to point out this has led to winning bids in recent head-to-head competitions.  Martello's valuation, with its last private financing at $0.15 per share, implies a value of $26 million in CAD.


Who Is Martello?


In simple terms, Martello’s solutions help to manage the ‘pipes’ to allocate and optimize bandwidth on networks. The growth of real-time services like voice and video strains network resources. To demonstrate, Martello uses the example of 30-second delays for various means of communication:

  • An email delayed by 30 seconds does not impact a business.
  • A phone call delayed by 30 seconds creates a business problem.
  • A response from an autonomous vehicle delayed by 30 seconds can be catastrophic.


Martello seeks to allow real-time services like voice, video, and eventually AV’s and smart city applications to work reliably on cloud and enterprise networks. Its current customers include Marriott Hotels, the United Nations, Carleton University, Banco Daycoval (Brazil), Firmdale Hotels (London and New York), and Harrow School (London), among others.


In January 2018, Martello merged with SD-WAN player Elfiq Networks from Montreal to become a market leader in the management and optimization of network performance for real-time services. Today, Martello’s staff totals ~64, and continues to grow.  Martello now addresses three areas:


  1. SD–WAN optimization with ATLAS SD-WAN suite;
  2. Cloud-hosted unified communications with Mitel Performance Analytics;
  3. Network performance monitoring and diagnostics for UC large telecom carriers.

Martello plans on organic growth within these three areas. The company also plans to make acquisitions to add to its network optimization offering. As evidence of this, Martello has also announced it has entered into a non-binding letter of intent to acquire Savision B.V. based in Amsterdam, Netherlands for ~$12.3 million in cash and shares.  Savision is a software company that offers fault and performance management, traditionally for Microsoft applications. It’s clear that Martello plans to be active in both areas of its strategy.  


Backed by Super Angel Wesley Clover International (the investment management company of Sir Terence Matthews), Martello has an impressive leadership team with experience in almost 20 tech start-ups and a proven track record of growing technology businesses in telecommunications and other sectors.


Terry Matthews has the same expectations for every company he has founded or backed. One concept that he emphasizes is employee firm or share ownership, as it creates a motivational culture for employees. Martello is no exception. Management and principals (including Wesley Clover) hold ~50 million shares and eight million options. These shares are subject to an escrow holding period. 10% are free upon final exchange bulletin and an additional 15% will be released every six months thereafter. This group holds~30% of the basic shares outstanding and ~45% of the issued options.  


In April, Martello stated its projection of $9 million in sales this year, and CEO John Proctor has the goal of $100 million both through acquisitions and organically. In the quarter ended June 30, 2018, its revenue was $1.9 million or $7.6 million annualized run-rate. Martello is growing, has high gross margins (~90%) in its business, and is operating at roughly cash-flow break-even. The majority of its revenue is either ‘sticky’ or recurring. 


Today, the company has cash of ~$8.5 million and debt of $595,395.  The majority of this debt is unsecured and a non-interest bearing loan from the Federal Economic Development Agency of Southern Ontario for commercialization of a specific project.


Martello Delivers Confidence In The Performance Of Real-time Services


Martello provides solutions focused on real-time services on cloud and enterprise networks, management and optimization of network performance with SD-WAN technologies and performance management software-as-a-service. Its solutions are deployed in over 7,000 networks, 16,000 devices and 150 countries. Below we take a closer look at the markets in which Martello operates and the technology and solutions it offers.


The Growth Of SD–WAN


SD-WAN is an automated, programmatic approach to managing enterprise network connectivity and circuit costs. It allows companies to manage their growing number of applications, as traffic is automatically and dynamically forwarded across the most efficient WAN path based on network conditions, security, and quality-of-service requirements. Enterprise customers can set routing policies as they want. As an example, an enterprise might send VoIP traffic over an MPLS VPN service, but if the MPLS connection becomes congested, the SD-WAN might switch the traffic over to broadband internet or 4G wireless circuit.


Companies are adopting SD-WAN technologies for many financial and operational benefits including the ability to cut down on time for IT staff that are devoted to managing networks, which is particularly helpful for SMEs and those with branch locations. In addition, SD-WAN allows for lower hardware costs which can account up to 35% of total costs.


SD-WAN Market Size And Current Competitive Status


Gartner predicts that in 2018 more than 40% of WAN edge infrastructure initiatives will be based on SD-WAN appliances, and that by the end of 2020, more than 60% of enterprises will have deployed direct internet offices in their branches (up from 30% in 2016). It predicts that SD-WAN has less than 5% market share today, but that 25% of users will manage their WAN through software within two years.


Gartner estimates the SD-WAN market size to be $1.1 billion by 2020, growing at 59% annually. Other estimates range from $6 billion by 2020 (IDC) and $7.53 billion by 2021 (Research and Markets). The range is due to assumptions on overall adoption and variations of the true definition of SD-WAN. IHS calculates total SD-WAN sales of ~$220MM in Q2 2018 and an overall 25% Q/Q growth rate for the industry. This run-rate of growth would imply a ~$6 billion market by 2020.


The SD-WAN technology is rapidly maturing, but there is not one single vendor that can deliver all that is required. According to Gartner, the WAN edge infrastructure market is evolving and undergoing dramatic change, driven by the needs of digital business transformation, increased usage of cloud services and real-time applications across the WAN.


The vendor landscape in the SD-WAN market is consequently fast-evolving and diverse, with some choosing a broader market focus, and others focusing on more narrow segments. There are more than 40 companies in the competitive landscape, including large incumbents like Cisco and Nokia, as well as smaller niche players like Cybera and ZeroOutages. Gartner predicts that the market should remain highly fragmented with six to ten strong players emerging. IHS’ 2018 Q2 analysis estimated VMware has the largest market share, at ~18%


Acquisitions in the SD-WAN space also confirm the opportunity, with Cisco spending ~$610 million in August of 2017 for SD-WAN company Viptela Inc. Viptela’s investors must have been ready to sell as they had previously valued the company at $875 million in the prior year. VMWare bought VeloCloud in November for an estimated $449 million.  


Martello’s Offering: Optimization With Atlas SD-WAN Suite


Martello bought Elfiq in December 2017 for $4.7MM, allowing offer ATLAS as its cost-effective SD-WAN as-a- service to complete the performance management cycle for its customers.


We find the Viptela acquisition point highly relevant. Martello has been competing head to head with Cisco (Viptela) and VMWare and winning. We view Martello’s product as a more niche-focused offering. These wins are because Martello’s solution is lower cost, easier to set up, and requires less overhead to configure into the current network environment. It also does not require an expensive IT certification to maintain, unlike its larger competitors. This makes the product more appealing for smaller, more cost-focused enterprises.  There are also some customer views that Cisco’s product was rushed to market. We remind our readers that the market opportunity and Cisco’s price paid point to multiples greater than Martello’s latest private valuation. 


Currently, Martello has market share smaller than most of its larger competitors, but it is winning against these known providers. As it scales its sales and marketing, initially Martello is leveraging its known Mitel customer base, but the market opportunity is broad, particularly in Europe where SD-WAN is emerging.


SD-WAN Case Study:


Mandarin Oriental Hotel Group operates luxury hotels, resorts and residences in Asia, Europe and the Americas. Offering high-speed internet access across its locations put a strain on networks from bandwidth requirements of applications like Skype, Netflix and YouTube. Martello’s Elfiq Link Balancing solutions are used to solve the bandwidth challenges, also adding a second layer of security and resilience so that if one device is unresponsive, a second one continues traffic management.


Cloud-Hosted Unified Communications Performance Management


Real-time services like Unified Communications (UC) are moving into the cloud as digital transformation accelerates. This has created network complexity and the risk of downtime — a problem companies like Martello can solve with its network performance management solutions.


Valued at $37.3 billion in 2017, the UC market is expected to reach $106.4 billion by 2022 (a 5.8% CAGR), according to Research and Markets, with the cloud-based UC as a Service (UCaaS) market forecast to grow at a CAGR of 10.6% to 2021 (Markets & Markets).


Within this market, Martello’s partner Mitel holds the #2 market position. Mitel has 4.2 million global cloud users, and 1.1 million UCaaS users in a market with a total TAM of ~50 million lines. Given the growth opportunity and market size, the impact of UC system downtime can be significant, and can result in large, direct losses of sales.


Martello Vantage is the suite of products designed to prevent, detect and troubleshoot UC performance problems like delay, jitter, packet loss and poor voice quality. Within its UC performance management solutions, Mitel Performance Analytics provides troubleshooting and insight into the performance of Mitel UC networks. The dashboard provides alarms and real-time alerts and offers tools to investigate and solve problems. A Mitel Gold Preferred Solutions Alliance Partner, Martello’s software is deployed in more than 6,000 networks monitoring over 10,000 devices around the world.


UC Performance Management Case Study:


Carleton University uses a Mitel unified communication system to provide voice, contact center and conferencing capabilities throughout its 35 campus buildings. As its students and staff are spread out, including onside student housing, communications must be available 24/7, requiring round-the-clock IT support. Carleton uses Martello’s Mitel’s Performance Analytics to monitor, alert and report on its communication systems, helping to avoid downtime to critical systems, and uses the data provided to meet safety obligations.


Network Performance Monitoring And Diagnostics For UC Large Telecom Carriers


Finally, beyond the vendors, service providers are offering managed SD–WAN services to enterprises. In the coming year, Martello expects to expand its SD-WAN solutions to telecom providers to offer it as a service model. The company hopes to add two or three carriers who will offer this service in and out of North America.  This emerging area would be interesting as it would generate high-margin recurring revenue.




Martello is the first company based in Ottawa to list publicly since 2015.  While it is small today, its opportunities are quite the opposite.  We look forward to tracking its progress as it helps disrupt enterprise networks and how services are delivered and consumed.

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Profile Picture: Todd Coupland, CFA

Todd Coupland


Phone: (416) 956-6025

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Amy Dyck


Phone: (416) 594-7232