Limitless WA: Acquisitions helped Family Zone expand from a $6 million IPO in 2016 to a market capitalisation now of about $430 million.
One of Perth’s most successful tech businesses was inspired by challenges in the founder’s own family life.
In response to the bullying, Mr Levy first tried to develop an internet filtering tool, but limitations with telecommunications infrastructure at the time forced him to shelve the idea.
A few months later, Mr Levy found his young son accessing an inappropriate music video, which refuelled his desire to make the internet a safer place.
Mr Levy said his child had become quickly consumed by the technology, and there was limited parental opportunity to control it.
“I wouldn’t drop my kid in Northbridge on a Friday night because I know it is a dangerous spot, but the internet is doing that; I’m dropping my kid into the equivalent of Northbridge constantly and he’s sitting in what should be a safe place in my home,” Mr Levy told Business News.
In 2014, Mr Levy began working with local developers and travelled to the US, where he met the creators of a filtering software.
He did not leave the US until he had a prototype: a product that connects to the router and interacts with apps on mobile or fixed devices.
The technology allows time and access controls to be placed on selected devices, while leaving others open to access the net freely.
Mr Levy said it took two and a half years to create something close to being marketable.
First funded by family and friends, Family Zone started looking for capital in 2015.
It had interest from an investment firm in the UK, but the deal fell through.
“In early 2016, we decided the only way to fund this thing properly was to list on the stock market,” Mr Levy said.
Family Zone listed in August 2016, in a $6 million initial public offering.
In the years since, the company has grown to have a market capitalisation of around $430 million, to a large degree the result of its acquisition strategy.
Family Zone made the first of many acquisitions in 2017, when it bought New Zealand-based company Linewize.
Linewize developed similar filtering technology, except its system was able to process data in the cloud rather than on a server, taking the pressure off the computing requirements of school systems.
Family Zone incorporated Linewize technology into its own and created a product that was easier to implement in smaller schools without large servers.
“This little New Zealand product and these Perth people somehow pulled this thing together and we are changing the world really quickly in this space,” Mr Levy said.
Going for growth
The past 10 months have been a time of significant development for Family Zone.
A June contract with a Texas school region added potentially 400 schools to its customer base.
In the same month, Family Zone raised $146 million to purchase its UK-based competitor Smoothwall for $142 million.
Smoothwall operates several digital safety products, which are used by about 6 million students in the UK and the US.
They include a filter, a firewall, a monitoring system to help schools detect online risks before they become real-life incidents, and a safeguard record manager to record child protection issues.
Family Zone told the ASX that Smoothwall generated about $30 million of annual recurring revenue and delivered unaudited underlying earnings of about $7 million for the financial year ending March 2021.
Legislative changes in the UK also mean the potential for future growth is high.
“In the UK, these types of monitoring equipment are now a legal requirement in schools,” Mr Levy said.
The purchase added 113 employees to Family Zone’s 180 existing staff, and it now operates in the UK, New Zealand, Australia, and the US.
“The plan at the moment is to integrate Smoothwall and create clearly the best cyber safety company in the world,” he said.
“I think that’s our mission for the next three to six months.
“There are some other assets out there that I would like to incorporate into our product portfolio that I’ll keep an eye on, but we are not ready yet.”
The purchase of Smoothwall was the second acquisition Family Zone has made this year, after securing classroom cyber safety tool Net Ref for $23 million in June.
“We are selling into a whole range of challenges, [it’s a] very competitive, aggressive market, and we are selling against incumbents,” he said.
“There’s always a filtering system in place that we have to beat because it’s required by law; and so you don’t win all the deals and typically the deals you lose are against the incumbent.
“We are constantly having to invest to innovate to add features that will win those sales for us.”