Sourcefire Shapes Up for IPO

Security startup clinches $20 million in late-stage funding, eyes a fourth-quarter IPO

James Rogers, Contributor

May 25, 2006

4 Min Read

Security startup Sourcefire has picked up $20 million in funding to boost reserves and lay the foundations for a possible IPO later this year. (See Sourcefire Raises $20M.)

Sourcefire's intrusion prevention system (IPS) hardware and software offerings are based around an open-source technology called Snort developed back in 1998 by Martin Roesch, Sourcefire's found.

Widely deployed in some key U.S. defense and intelligence deployments, Snort threw Sourcefire into the national media spotlight earlier this year, when Check Point tried to acquire the startup for $225 million.

With the howls of protest from the controversial U.A.E. ports deal still ringing around Washington, the same U.S government review board turned its attention to the Sourcefire/Check Point deal, which was eventually called off. (See US Checks Check Point, Check Point Snaps Up Sourcefire, Check Point Buys Sourcefire, and Check Point, Sourcefire Team.)

Michele Perry, Sourcefire's Chief Marketing Officer, told Dark Reading that the main driver behind the late stage funding was, "to bolster the balance sheet," in the aftermath of the deal's collapse. This, she adds, is "to ensure that customers know that there's no risk."

Moreover, Perry confirmed that Sourcefire is even eyeing a possible IPO later this year. "We're running the business so that that might be an option in the fourth quarter."

Peter Christy, principal analyst at Internet Research Group, thinks that this is a distinct possibility. "I think that they are a real candidate," he says. "The company, from everything that I have heard, are doing really well in terms of growth and revenues."

The startup, which was founded in 2001, reached profitability last year and was cashflow positive in the first quarter of 2006, although Perry would not reveal revenue figures.

The CMO did confirm, however, that the firm has also racked up more than 1,000 enterprise customers, which include National Institutes of Health Federal Credit Union, manufacturing firm Pentair and Japan Telecom subsidiary Jens Corp. Sourcefire has also teamed up with some big-name vendors such as IBM, Sun Microsystems, and Symantec.

But Sourcefire is not the only vendor playing in the IPS space, with the likes of Cisco, Juniper, and 3Com all touting security offerings. (See Cisco Prevents Outbreaks, Juniper Intros Daily Signature Updates, 3Com Closes TippingPoint Buy, and 3Com Makeover Features Security.)

Christy, however, says that Sourcefire has distinguished itself by its ability to harness the open-source movement into robust product offerings. "Some people think that open source is antithetical to security," he explains. "But there's an equally compelling argument that says that if you want to build really strong software, there's nothing better than having a broad community of people look at it."

As well as bolstering the Sourcefire balance sheet, Perry also confirmed that the latest funding will be used to help the startup target new markets, although she refused to say which sectors these will be. And she hinted around possible new products coming in the next couple weeks.

The startup, adds Perry, is also bolstering its 150-strong workforce. "We're aggressively expanding our European and our federal [government] operations."

Sourcefire's latest round was led by Meritech Capital Partners and included Sierra Ventures, New Enterprise Associates, Sequoia Capital, Core Capital Partners, and Inflection Point Ventures. The latest cash infusion dwarfs the $15 million Series C Sourcefire completed in January 2004 and brings the startup's total funding to over $53 million.

The Columbia, Md.-based firm, however, is not the only security startup raking in the cash at the moment. Today, identity management vendor Applied Identity clinched $12 million in a Series B round, bringing that firm's total funding to $23 million. (See Applied Identity Raises $12M.)

— James Rogers, Senior Editor, Byte and Switch. Special to Dark Reading.

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