GeoTrust Looks Inside for $3.7M

Companies such as GeoTrust allow you to hand over your credit card to the youngster behind the counter at your local department store or supermarket without providing fingerprints or a DNA sample.

Since its inception in early 1998, the security and identity verification software provider has become one of the largest identity certification authorities. The privately held company was even earning a profit.

But Wellesley Hills, Mass.-based GeoTrust is expected to announce this week it has returned to the VC well and brought back a $3.7 million Series E round. The funding brings the company’s total venture raised to date to more than $40 million.

The Series E was a completely inside round as Prism Venture Partners and St. Paul Venture Capital co-led. Castile Ventures also invested.

Neal Creighton, the company’s president and CEO, says that while his company spent the last half of 2003 generating positive cash flow, the company wanted to raise additional capital to be able to expand and enhance its enterprise security business.

He says that GeoTrust’s domestic market penetration is roughly equivalent to that of its main competitor, Verisign, but he acknowledged that Verisign has a broader international presence.

Creighton says that GeoTrust should be profitable again by the third quarter of this year. The company employs 70 worldwide and will likely not have more than 110 by next year. Most of its new hires will be in sales and marketing and focused on enterprise security services.

Growing the enterprise business will be a challenge, he says, because many large enterprises prefer to do business with well-established players, and the company is only now starting to get that type of recognition.

Creighton says that the latest round represented a 40% uptick in GeoTrust’s valuation.

The company raised a $14.6 million Series B round in 2000 with a post-money valuation of $34.5 million, according to Thomson Venture Economics (publisher of PE Week).

“The valuation at the time of the last round was pretty much flat,” Creighton says.