High-speed encryption technology company CipherOptics has landed $9.6 million in second-round financing to ramp up its sales efforts and round out its product portfolio.
The round was led by Massachusetts-based Kodiak Venture Partners, which also was the sole investor in the company’s first round 13 months ago. Also taking part this time were Origin Partners of New Jersey, Axiom Venture Partners of Connecticut and Florida-based New Tampa Technologies.
“They have a product that is generating revenue, and the market opportunity is large and growing,” Kodiak partner Ilan Carmi, who serves as CipherOptics’ board chairman, says when asked what his firm likes about the company.
CipherOptics last fall began shipping its Security Gateway device, which can encrypt data passing through a network at gigabit speeds, allowing companies to secure all of their data without compromising the performance of their network. Carmi says the company already is gaining traction in the medical, financial, government and e-commerce markets with a limited sales push.
Scott Palmquist, vice president of product development, says the new funding will boost the sales efforts by allowing the company to do more marketing to OEMs and to expand its network of resellers.
Some of the money also will be pumped into developing devices to round out CipherOptics’ product line, Palmquist says, adding the first will be unveiled this fall. These include products that run at slower speeds or use different encryption algorithms.
“We’re proud of what we’ve built, but we would like to build more things,” he says. “We’re going to stay within the information protection market, but we’re looking to provide people with different options. Not everyone has a gigabit Ethernet.”
Market research firm IDC says sales of Internet security software should hit $14.6 billion by 2006, more than double the $6 billion sold in 2001.
CipherOptics was formed three years ago by two network security experts but operated in stealth mode until announcing its first funding round last year. Kodiak brought in former Cisco Systems executive Ron Willis as chief executive last summer to take the firm to a higher level, and Carmi says the new funding is evidence that he is succeeding in that effort.
Not having a regional backer among the company’s lineup of investors doesn’t faze CipherOptics management, according to Palmquist, who says that officials “like the people we have sitting at the table” and believe they offer the expertise to assist the company’s growth – albeit from a distance.