A couple weeks ago I had the pleasure to get interviewed by Lukas Fiedler, owner of https://altcoinspekulant.com. Please find here a loose translation of our chat.

Lukas Fiedler, “Der Altcoinspekulant” (top) and Robert Rogenmoser, CEO of Securosys (bottom)

Lukas Fiedler: Welcome to the Altcoinspekulant video interview, today with Robert Rogenmoser from Securosys SA in Switzerland. Hello Robert, nice to have you here.

Robert Rogenmoser: Hi Lukas, thank you for having me.

Lukas Fiedler: Introduce yourself briefly before we start with the first question about Securosys SA.

Robert Rogenmoser: As you already mentioned, my name is Robert Rogenmoser, I am the CEO of Securosys. I’ve been around for over 50 years, that means I’m one of the older gray-haired guys in the crypto scene. My career is actually quite simple: I studied in Switzerland, completed my doctorate at ETH Zurich, spent 17 years in Silicon Valley, and cam back to Switzerland about 5 years ago.

Lukas Fiedler: In 2014 you founded Securosys SA. Now you decided to start an ITO with which you will issue shares as tokens. What was the decisive argument for this ITO compared to a conventional financing method?

Robert Rogenmoser: Yes, that’s right, we’re doing an ITO, although my lawyers now want me to call it a Security Token Offering, or STO.

As you said, our token have dividend rights and these tokens can be converted into shares.

Why did we do that? There were several reasons: one of them is that our products are needed to protect private keys in the Crypto Currency and Blockchain systems. With the ITO we see a huge marketing potential to reach more potential customers so that they learn how to protect their crypto currencies assets. In the long run however, the main market will be the protection of blockchains with our HSMs.

Lukas Fiedler: Now that you’ve talked about your products, can you explain exactly what kind of products Securosys provides?

Robert Rogenmoser: Securosys offers among other things so-called hardware security modules, which you have to picture as following: It’s a network appliance, a 19-inch box, which securely generates encryption keys, in particular for crypto, private public keypairs and their address. These are securely stored in the HSM that controls access to these key. For customers that don’t want to operate the devices themselves we offer them also as service, it’s our Clouds HSM.

Lukas Fiedler: Exactly and this is essential for the crypto scene in which many applications still run on AWS cloud servers where all relevant information is not protected well enough. You started in the traditional banking scene. For example, your products are used by SIX. What has to change in your product range, or which additional features do you have to offer to gain a foothold in the crypto market?

Robert Rogenmoser: Our company is now 4 1/2 years old and at the beginning we actually wanted to “only” build encryption devices to protect industrial communications. Two months after we started, SIX, the biggest Swiss payment provider, came by with the SNB, the Swiss Fed, and asked us if we could build them an HSM. After like a 5 nanosecond reflection we said yes. So we did and since 2016 our HSMs are in use in the Swiss Interbank Clearing system and also for the settlement in the SIX stock exchange. This is obviously our big reference card.

Our HSMs already had many features that nicely fit for the crypto assets space. Moreover, we have cryptographic experts in house so that we can extend them. The traditional financial systems are based on PKI. One difference, however, is that in the crypto sector many blockchain do not use the standard algorithms, they often have their own, different elliptical curve. This is not a big challenge for us, as we can simply program them into our devices. Our customers can even program their own elliptical curves into our HSM, such things are totally easy for us.

Another feature that we have been working on since early 2017 is multi-signature. Here, I don’t mean the way Bitcoin is doing it, which we of course also support.

We initially targeted it for eIDAS and certified digital signatures. systems. The aim there is to create a digital document with two signatures, just like it is required by the commercial register, signed by two company officers. This is now already implemented in our HSMs. The verification of two or more signatures fits naturally top on crypto currencies. Now you can implement secure process, where the private key is only used when the required people have signed off. We remove the problem where a single person has access to the private key and can do what he wants.

Lukas Fiedler: Are there any products that you would like to develop especially for the crypto market?

Robert Rogenmoser: Absolutely. First and foremost we will further expand our HSM’s functionality. But already now, you can use them for your system and companies are already offering our HSM’s in crypto storage systems. In a first step we are constantly expanding the list of supported currencies: currently support over 70 currencies, including the top ten currencies. This includes Ripple and IOTA. Others will follow.

Lukas Fiedler: Yes that is also relatively difficult

Robert Rogenmoser: Yes it was quite challenging, and IOTA, I think is not a blockchain anymore.

One of the problems we are also looking into are the Trusted Execution Environments/Platforms: You said earlier that people use AWS for their systems and keep their sensitive data there, which we find very critical of course. Since AWS is a more or less virtual system and on virtual machines you have always to consider the possibility of an attack/intercept by other processes. They can intercept passwords and keys very easily, if you get a bit deeper into it. This is where we see a large future potential for us. The problems are well known and published: just read up on Meltdown and Spectre, and whatever else will pop up in the next weeks. So we will build trusted execution platforms, this is another development besides our HSM business. In such a platform you know that only have your own code is in it and only it is executed. The applications that should be run on such trusted execution platforms are varied. It start with a simple verification platform to run for example a Bitcoin node for verification, so that you can verify the blocks too. If you think about it a little further about a Proof of Stake node, you want to run it also in a controlled environment. You only want to risk the stake, your money, only as long as you want to verify the transaction, you don’t want to just put it on Amazon and hope that nobody has access to it. Also the Lightning Network is an interesting system to trusted execution platforms, and more of these applications are also coming up in this space. At the moment we are busy building a trusted execution platform MVP — in the middle of next year we will have such a system.

Lukas Fiedler: Very cool. Now there are of course not only you on the market, but also other manufacturers of HSM modules. What about the competition in the legacy market? And of course, what are their plans to expand in Krypto?

Robert Rogenmoser: Yes, the legacy market is of course a tough business. Or biggest competitors are Thales and Gemalto. What is interesting at the moment is that Thales is trying to buy Gemalto for about 5.4 billion dollars. Funnily enough, as a small Swiss company we are asked by the EU Commission what we think about it. We filled out their questionnaires and had interviews with the EU Commission, us, such a small fish. As you might have seen on the whitepapers, we are still young and growing. We had revenues of almost CHF 5 million last year, interesting situation. There are also other suppliers, e.g. the Utimaco in Germany. They have been around for a relatively long time and have interesting products, the company is very established, but not particularly innovative. All over the world here are a few smaller, regional suppliers of HSM. At the moment, we are leading in the HSM market in performance, quality and security. In particular, we have the first integrated solution, algos and multi-signature, of crypto in HSM’s, so that we are ready to conquer the market with our products. That’s also the reason why we conduct a financing round. We want to represent ourselves locally all over the globe so that we can find new customers and support them building their systems wherever they are.

Lukas Fiedler: Now to a somewhat more difficult topic, namely the valuation of your company. This is of course important if you want to invest in a start-up, even though Securosys has been on the market for 4 years now. How do you justify the valuation of around 60 million in your whitepaper?

Robert Rogenmoser: Sure, I can explain that, there are many points to it. First, the investor can trade our tokens, he stays more or less liquid. It is different with shares. Since we are a private company, shares are not easily tradable. When you buy shares from us, you become subject of the shareholders’ agreement. It gives all shareholders pre-purchase rights. Any such sale will take several months. Not so with Tokens, where you stay liquid. This is certainly an advantage over normal venture capital financing.

How do we arrive at the figure of CHF 60 million? There are many ways to get to it. One would be to take the turnover times 10 and put a premium on it. That gets us to this range. I think if we were a company targeting purely legacy markets, e.g. areas like financial transactions, PKI, database encryption etc. then I would have to agree with you, the valuation is very aggressive. However, you have to look at it besides the legacy markets. We have here two new very big markets, crypto assets, where we expect big growth in the next 1–2 years, and blockchain area. We assume that the blockchain applications will far exceed the crypto currencies systems. It is our goal to guarantee the security for all users and operators of these systems with our products. The first application is crypto storage, which is incidentally also the company name of our first customers. Many people have their own wallet. The problem however is, that there are lots of people who don’t dare to manage such a wallet themselves. This deviates from the original idea of the blockchain fundamentalists, to have everything set up yourself under your own control. Most people will want to use intermediaries such as banks or custodians. It is precisely these companies that need systems that are scalable and enterprise-ready, this is our market. We want to seize this great growth opportunity with the help of financing. We are the only company that is ready with working systems.

Lukas Fiedler: What are the next steps for you after the ITO, do you already have plans for the next years? And where do you currently see the biggest hurdle? Do you have new customers?

Robert Rogenmoser: There are new customers, but of course they want to remain anonymous. What’s interesting, however, is that we work with a lot of banks, they want to be in crypto, but they don’t want to make this involvement public.

Lukas Fiedler: Of course it’s nice to know that this is coming (grinning).

Robert Rogenmoser: What we do with the money we earn is the further development of our HSM so that we can support all currencies. With the trusted execution platform, we are in the process of specifying the MVP so that we can build it by next year. A large part will also be invested in international expansion: Last week we opened our first subsidiary in Kaufbeuern, near Munich, Germany. Form there we can serve our customers in Germany without having to deal with customs and zealous customs officers. That’s also why we decided to open a location in Germany.

Lukas Fiedler: I am very curious how the Securosys story evolves. Thank you for your time!

Robert Rogenmoser: You are welcome, thank you for having me.