Sygate Raises $17.5M for Security

There’s no question that corporate America has been investing in firewalls and anti-virus products. However, now that the market is saturated with these basic security devices, how do new security companies convince belt-tightening corporations to open up their wallets again?

A group of investors believes that the answer may lie in creating a product that enables clients to make more efficient use of its existing security program and has funded a company that makes such a product. Sygate Technologies Inc. develops centralized security technologies, and has received $17.5 million in a Series D private equity round. The offering brings the company’s total venture take since 2000 to $29 million. Trident Capital led the latest deal with a $6 million investment, with Trinity Ventures, MeVC Draper Fisher Jurveston Fund I and CIR Ventures also participating. Peter Meekin and Donald Dixon, both managing directors at Trident Capital, have joined Sygate’s board of directors.

It is interesting to note, Sygate is the first new investment for MeVC since its investment in CBCA Inc., which it announced on May 2. For MeVC, this investment follows a summer that involved reworking its own structure, amending its investment parameters and wading through continued legal conflicts with its largest investor, Millennium Partners.

Sygate CEO John De Santis says that the company will use some of the cash for technology upgrades, but that most of the proceeds from the round will go toward marketing and sales development as the company goes after what De Santis sees as a growing market for Sygate’s product. “The security concerns surrounding the continued expansion and opening of corporate networks validates tremendous growth potential for Sygate,” he says.

Sygate Technologies, based in Fremont, Calif., was founded in 1996 and began marketing its centralized security technology in 2000. Since then it has succeeded in signing on 40 corporations in the Global 500 as customers, including Prudential and Ahold USA. As the investors see it, Sygate’s competitive edge is a software product that allows customers to enforce their computer security systems more efficiently by automating the process. “Sygate has produced the best, most mature enterprise software for policy-enforcement capability of security measures,” Trident’s Meekin says. “Their software has a centralized capability to enforce desktop security devices such as firewalls, AOL instant messaging and anti-virus protection. For example, if a company has a policy of updating its anti-virus software every 30 days, it is usually done manually by each user at each desktop. The person is not allowed back into the network until he or she has performed the update. This software automates the enforcement, so users never need to deal with it. Time is saved, and the security officer is able to sleep better at night.”

De Santis feels that focusing sales efforts on larger enterprises provides the economies of scale that offer cost savings to prospective clients. “What I can tell people is that if you get one fewer help desk call per user, you’ve made your money back,” he says.s

If the growth De Santis expects does materialize, the company will not seek any more capital in the venture market. Should plans change, however, Meekin and Trident Capital seem prepared to stay the course with Sygate. “We like the product and the management team, and we plan to support the company as far as possible future financing needs,” he says.

Contact Thomas Van Riper