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Neocleus Nabs $11M for Virtual Security

Startup takes aim at virtual desktops with Xen-based software

By James Rogers, June 19, 2008, 5:30 PM

Israeli startup Neocleus has clinched $11.4 million in Series B funding, bolstering its efforts to tighten virtual desktop security.

The round, which was led by Battery Ventures and Gemini Israel Funds, brings Neocleus’s total funding to $16.4 million, and the vendor is now looking to flesh out its U.S. business.

“Today, we’re mostly R&D [so] it’s for expansion of sales and marketing,” says Etay Bogner, Neocleus CTO, explaining that the vendor is looking to expand its 35-strong workforce to 50 during the next 12 months.

Neocleus, which only launched its first products last month, is promoting its Trusted Edge virtual appliance as a way for users to lock down "endpoint" devices like desktops and laptops. This solves many of the security problems associated with virtualization, according to Bogner.

A virus in one VM (virtual machine) could easily infect another VM, particularly in the Windows environment, he says, explaining that Neocleus uses a Xen-based hypervisor to isolate specific VMs.

“We have taken the Xen hypervisor and turned it into a client hypervisor,” he says, adding that this can be used to isolate vulnerable applications such as email and IM. “What we’re doing is running VMs side by side, independent of each other.”

Neocleus is not the first vendor to focus its attention on virtual desktop security. VMware’s ACE, for example, also isolates VMs, although Tel Aviv-based Neocleus is now offering an open-source, Xen-based alternative.

Other firms playing in this space include Sentillion, which is focused mainly on the healthcare sector, and Secure Command, which is currently beta testing its Internet Cleanroom offerings.

“This is the way that desktop virtualization is going,” says Rachel Chalmers, a senior analyst at the 451 Group, explaining that users are looking for ways to lock down VMs. “What Nucleus can give the hypervisor vendors is a way to do the endpoint security.”

Neocleus’s Bogner would not reveal whether deals with other virtualization specialists are imminent, although he did not rule this out. “We’re talking with everyone,” he says, hinting that VMware could even be a future partner.

This could be a shrewd move, particularly given that VMware remains synonymous with virtualization, despite a recent spate of desktop announcements from Citrix, which bought XenSource for $500 million last year.

Neocleus has revealed the identity of one of its partners, the consulting wing of Fujitsu, but scant details of the deal are available. “They are a big systems integrator, and there’s a lot of projects that we’re investigating,” says Bogner, adding that it is “too early” to discuss specifics of the relationship.

The exec nonetheless confirmed that Trusted Edge will be sold both as a standalone product and a managed service, explaining that some end-users are already testing the virtual appliance. “We’re working with a couple of customers in the financial area in the States, Europe, and the Far East,” he says.

Neocleus, which has its U.S. base in Jersey City, N.J., has released the identity of one of these firms: Paris-based Standard Chartered Bank is currently evaluating Trusted Edge.

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  • Battery Ventures
  • Citrix Systems Inc. (Nasdaq: CTXS)
  • Gemini Israel Fund
  • Neocleus Inc.
  • Sentillion Inc.
  • The 451 Group
  • VMware Inc. (NYSE: VMW)
  • XenSource Inc.

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