Egress Software Technologies, a UK-based provider of email security that addresses human-activated risk, will consider acquisitions to expand its technology portfolio, CEO Tony Pepper told Mergermarket. 

Attractive targets include early-stage companies with technologies in adjacent fields to Egress’ core, cloud-email security business, such as security awareness and training and human risk management providers, Pepper said. Egress, which exited 2022 with a GBP 32m (USD 39.7m) revenue run rate, looks at start-ups with no fewer than 10 and no more than 60 employees, he added. 

The company has been working with Citi for many years and the bank is supporting it in its growth strategy, he said. Egress has a list of potential targets on its radar, but there are no active M&A talks at the moment, he added. 

Pepper said he expects the number of potential targets to increase in the coming months, and that deals will be opportunistic. Several companies will need to raise funds and will face challenges, as investors are cautious and valuations are under pressure, he added. 

Egress, which is growing at an annual rate of 24%, expects to be able to finance small deals with its own resources, he said. In June 2021, it acquired Aquilai, a British anti-phishing provider with machine-learning and natural language processing technology that stops targeted email attacks. 

The business will review the option to raise a Series D round towards the end of this year, Pepper said. Egress expects to reach cash flow break-even in September and will consider raising funds only if the economic environment improves, he said. 

If it undertakes a Series D, it will target growth-stage investors with sector expertise, at both financial and strategic, he said. The size of a potential Series D has not been decided, but the proceeds would be used to accelerate Egress’s go-to-market strategy, maintaining the cash flow break even, he said. 

In an interview with this news service in April 2022, Pepper talked about the company possibly raising a Series D round larger than its USD 40m Series C in the second half of last year. The worsening of the macroeconomic environment has convinced Egress to put this plan on hold, he said now. 

At the end of December 2018, Egress raised a USD 40m Series C round. Since being founded in 2008 it has raised a total of USD 47.4m. Its investors include FTV Capital and Albion Ventures.   

London-headquartered Egress has approximately 280 employees and expects to grow this figure to 315 by the end of this year, Pepper said. 

The North American market is growing very fast, doubling every year, and currently accounts for 12% of the company’s total revenues, he said. The company has offices in New York, the largest, Boston and Toronto, he added, and mentioned that at some point in the future it might consider setting up an additional office in the central part of the US. It has also an office in Australia. 

Egress’s Human Layer Security platform prevents human-activated breaches, defending against inbound and outbound threats. It uses contextual machine learning to detect and prevent abnormal human behaviour including misdirected emails, data exfiltration, and targeted spear-phishing attacks, as reported.