Proofpoint Fries More Spam with $9M

In a further boost to the anti-spam market, Proofpoint raised a $9 million Series B round last week, less than three months after emerging from stealth mode and announcing a $7 million Series A. The company, which was founded by a big name from the Netscape era, Eric Hahn, recently added anti-virus protection veteran Bill Larson to its board.

The latest funding and board appointment comes as Cupertino, Calif.-based Proofpoint vows to expand its sales and marketing efforts across North America and Europe and to seize the opportunity in this “white hot market” of fighting unwanted and infected email.

“This is really driven by the early success of the product and the early demand that we have,” says Gary Steele, Proofpoint’s CEO. Proofpoint has 50 employees, up from about 30 this summer. Steele expects the company to employ about 100 by October 2004.

“They made tremendous strides in the company since their Series A,” says RRE Ventures General Partner Stuart Ellman, who also joined the company’s board of directors. “It became clear that they would need only one more round to take it to profitability.”

Ellman knew Steele from Steele’s tenure as CEO of another RRE portfolio company, Portera Systems, which was acquired by Exigen last year.

Former Netscape Communications CTO Hahn founded Proofpoint in June 2002 and also serves as chairman. Hahn, who incubated the company at Mohr Davidow Ventures (MDV), has been a serial entrepreneur and investor in several tech ventures. Prior to Netscape, Hahn was the founder and CEO of Collabra Software Inc., a groupware provider that Netscape acquired.

Larson, whose appointment to the board was made separate from the company’s latest funding efforts, brings the number of members on the Proofpoint board to six. Larson is the former CEO and chairman of Network Associates Inc., an anti-virus software maker. Larson served with McAfee for over eight years, overseeing numerous acquisitions as the company grew to become one of the leaders in its market. Larson drew comparisons between Network Associates and Proofpoint, saying Proofpoint has similar potential.

“Anti-spam protection will have an even greater impact on global computing productivity than anti-virus protection has had,” Larson says.

Proofpoint’s customers so far include industrial equipment maker Coen Company and sales and marketing company E.piphany (NASDAQ: EPNY).

Proofpoint plans to open later this year as many as seven sales offices nationwide, including outposts in Boston, Chicago and New York. The company also plans to open an office in Europe in 2004. Steele declined to say where in Europe the company was scouting.

The Series A, while announced this past summer, closed in December of 2002.

New investor RRE Ventures led the Series B round with $4 million. Previous investors MDV, Benchmark Capital and Stanford University also invested.

The Series B round closed in early October. MDV provided seed funding to the company last summer, which was rolled into the Series A. The Series B was an up round from the Series A, which had an approximate post-money valuation of $15 million. The Series B round had an approximate pre-money valuation of $18 million.

The competition among the spam killing companies promises to be fierce, with many startups getting funded lately. The Radicati Group, a Palo Alto, Calif.-based market research group, says that companies selling anti-spam products anticipate revenue of up to $650 million this year and $2.4 billion by 2007.

This has been a boom year for anti-spam technology companies, as big-name VCs line up to invest. Most recently, Mountain View, Calif.-based Corvigo closed a $5.5 million Series A round that was funded entirely by Sequoia Capital.

Also noteworthy, FrontBridge Technologies of Marina Del Rey, Calif., raised $8 million in a Series C led by BA Venture Partners; Menlo Ventures invested in San Bruno, Calif.-based IronPort Systems; and Menlo Ventures also led MailFrontier’s $10 million over-subscribed Series B round deal with $5 million.

Steele says that he sees publicly traded security provider Trend Micro (NASDAQ: TMIC) as a larger threat to his market share than his venture-backed startup counterparts in the anti-spam space.

Email Matthew Sheahan