PGP Founder Aiming To Protect VoIP

Investors looking to back an entrepreneur from the dot-com days may want to give Phil Zimmermann a call.

In 1991, Zimmermann founded Pretty Good Privacy, which made one of the most widely used email encryption software in the world today. Now the cryptography guru has set his sites on what he hopes is another VC-backed venture. This time, he wants to ensure that no call using VoIP – the technology that enables people to make calls using an Internet connection – is subject to intrusion either.

The market opportunity looks big. Consumers like VoIP because it’s easy to use and cheaper than calls made over the Public Switched Telephone Network, or PSTN. Enterprises like it because they can run their own VoIP services across far flung offices, including in Third World countries without traditional phone service and for very little expense.

Further, as the technology grows in popularity, security is getting more attention. Cisco Systems and Hewlett-Packard are among the large corporations that have identified weaknesses in their VoIP products in recent months. (HP went so far as to ask employees not to use VoIP for a short period, until it could ensure that their calls aren’t vulnerable to third-party eavesdropping.)

In trying to get ahead of great adoption trends, Zimmermann has created a prototype program that he says turns current VoIP encryption programs on their head. It’s in its early stages. He hasn’t even come up with a name for the Menlo Park, Calif.-based company, nor has he named the product.

Though he intends to sell to enterprises, as well as to license his technology to VoIP companies, he “hasn’t quite figured out the prewar strategy just yet,” he says. Zimmermann, who is looking for a CEO, is currently the only employee. He admits that his program is a bit buggy. “It allows secure calls. It employs solid, working crypto, but I’m still working out Net firewall traversal problems. Sometimes, too, it doesn’t recognize when the other guy hangs up the phone.”

Finally, Zimmeran isn’t sure of how much money he needs to raise, though he’s in the market. “We’re trying to figure out cost estimates for various things we want to do, including what it will cost to market the program, and the number of other products that we see on the roadmap,” he says. “We’ll either be in the $700,000 seed range or, if we go for a Series A round, we’ll be looking for under $5 million.”

What Zimmermann does have is an impressive CV, determination, and some important friends. To wit, though Pretty Good Privacy didn’t return its 50-plus angel investors the $13 million that they had poured into the company (PGP sold to Network Associates for $35 million in 1997), its technology continues to affect the lives of hundreds of millions of people every day.

For his new product, Zimmermann has enlisted the help, and financial backing, of some heavy hitters, including VoIP industry pioneer Jeff Pulver and Richard Clarke, the onetime national coordinator for infrastructure protection at the National Security Council. Clarke will sit on the board of Zimmermann’s new company.

Whether his new plans pay off remain to be seen. Zimmermann, who has been quietly working as a consultant since leaving Network Associates several years ago, says he is on the scene to stay, though.