Security Demand Fuels Sourcefire

Post Sept. 11, it’s a pretty safe bet that a security company will be able to secure venture capital financing. In fact, Sourcefire Inc.’s latest deal was more than three times oversubscribed.

“We had closed on $2 million in February, and we were only looking for $6million,” says Wayne Jackson, Sourcefire’s new chief executive. “We took some extra money but could have taken even more. “

The Columbia, Md.-based company, which protects companies and government organizations against computer attacks, snagged $7.55 million in its Series A round of financing.

Sierra Ventures, which put $4 million into the deal and took a 30% stake in the company, led the round, along with Core Capital Partners. Other investors in the deal include Inflection Point Ventures and the Maryland Department of Business and Economic Development.

“We had been looking at the security space for about nine months and thought we would invest in firewalls,” says Tim Guleri, partner at Sierra Ventures. “Firewalls are pretty important, but this is the next phase.”

Guleri says Sourcefire is unique because it uses open-source Snort Intrusion Detection System, a widely used piece of network security software that was developed by the company’s founder and chief technology officer, Martin Roesch.

“Snort is like the engine and Sourcefire is like the whole car. It lets us detect an intruder even if a firewall does not,” explains Jackson.

While Sourcefire’s technology is of the next generation, it faces a number of incumbents in the sector. “Cisco, Symantec and ISS have older technology but are comparable,” says Jackson. “But fundamentally we’re more flexible in detection and more efficient. Snort is a best of breed product.”

Sourcefire’s new infusion will support staffing increases – right now the company has about 30 employees, but it is looking to double that number in the next six to nine months – and for research and development.

Founded in 2001, the company is already shipping products to 27 customers and brought in more than $1 million in sales last year.

“We’re seeing sales happen at a rate that is contrary to the market. If that continues, we’ll want to grow quicker than we initially thought,” says Jackson.

If it keeps up its on pace, Sourcefire will look to ramp up more quickly, which means it will make another trip to the private equity well later this year. The company expects to reach profitability by the middle of next year.

Looking beyond another round, Guleri says that Sourcefire has the legs to support itself in the public market in five to seven years.

Contact Danielle Fugazy