Mocana secures $7M

Larry Marshall is not one to discount the benefits of due diligence.

“The CEO gave us their list of customers,” says the managing director of Southern Cross Venture Partners of the firm’s investment last week in Mocana Corp. “We talked to 12 or 14 of those people and I talked to 15 other customers I knew independently. The people referred to us by the company are always going to say good things. But in some cases the people I talked to independently were more positive than the ones the CEO provided.”

The testimonials worked in Mocana’s favor. Last week, the San Francisco-based security software company, which provides protection for network-connected devices, raised a $7 million Series B round. Southern Cross led the investment, which included participation from previous Mocana backer Shasta Ventures. The company has now raised $12 million in total venture funding.

Marshall says that key to his firm’s decision to invest were talks the firm held with dozens of Mocana’s satisfied customers, which include Dell, Nortel, Symbol and Honeywell.

What they raved about is that Mocana’s products protect PDAs, DVRs, printers, portable music players, routers and even cars or digital picture frames—devices that represent a so-called “soft target” for hackers seeking to enter a company network.

Mocana CEO Adrian Turner says the company’s software has attracted major interest in the venture capital community because of the increasing frequency in which the “wired world” is heading off the PC and into handhelds and other devices.

“We believe the number of wireless, but connected devices will far exceed the number of PCs connected to networks if we haven’t already crossed over that threshold,” Turner says.

Forrester Research predicts that by 2010 there will be 14 billion devices connecting to Internet, with 95% of those being something other than a PC, according to information provided by Mocana.

If recent history is any indication, the company could be ripe for a merger or acquisition. At least two other companies in the last two years that have specialized in protecting data on handheld devices have been snatched up by larger security companies.

Last year, McAfee Inc. purchased SafeBoot Holding B.V. for $350 million in cash. SafeBoot’s data protection suite lets customers encrypt individual files for safe distribution to and from mobile devices. The company was owned, or partially owned by Summit Partners, which made a $47 million investment in the European company in late 2005, according to Thomson Reuters (publisher of PE Week).

Two years ago, Israeli security software company CheckPoint Software Technologies Inc. bought Sweden’s Protect Data AB in 2006 for $586 million. Protect Data is best known for Pointsec Mobile Technologies, which specializes in protecting the mobile devices of companies and government organizations. Thomson Reuters has no record of Protect Data raising institutional funding.

Turner says that Mocana will use the funding for marketing activities in international and domestic markets, adding that interest from Southern Cross and Shasta is fueled by the fact that Mocana is solely focused on providing security to devices.

“I haven’t seen anyone approach security the same way as us,” Turner boasts. “If you talk to the customers, Mocana is very much a breath of fresh air in the security space.”