Virus Fighter Secures $10M

Combating hackers and the masterminds behind all the viruses sent to the world’s computers is a vibrant industry all its own. “It’s kind of like an arms race,” says Peter Selda, president and CEO of WholeSecurity. “People figure out new ways to hack and you have to be diligent and consistently figure out new ways to improve your products and protect your customers.”

The security side of this arms race got a boost last week as WholeSecurity announced it closed on a $10 million oversubscribed Series B round.

New investor Parker Price Venture Capital led the round with an investment of about $2.5 million. Previous investors New Enterprise Associates (NEA), Trellis Partners and Venrock Associates invested again pro-rata. The company named Kent Price, founder and president of Parker Price, as an observer to its board.

Just in case anyone may thing Selda’s company is benefiting from an investment bubble generated by the proliferation of viruses, he points out that his company was raising money back when few others were. The Austin, Texas-based company raised a $10 million Series A in August 2002 that had a post-money valuation of $17 million.

The Series B post-money valuation is undisclosed, but Selda says it is “a significant increase” over the Series A valuation.

Prior to its institutional funding last year the company raised approximately $500,000 from individual investors.

The company plans to use the latest funding for sales and marketing, and to keep developing its products. With 45 employees now, its CEO says it will likely double its staff in within a year. WholeSecurity has about 30 clients, including Deutsche Bank and Comerica.

Research firm Gartner and securities firm SoundView Technology released a study last year predicting a 1.6% increase in IT network security spending in 2004.

The research firm IDC predicted a less conservative estimate that IT security spending would increase up to 8% in 2004. Meanwhile, a survey by the Yankee Group found that more than half the companies surveyed planned to increase security spending over the next year.

Thomson Venture Economics (publisher of PE Week), reports that private equity investors pumped more than $3 billion into security providers in 2003, up from $2.7 billion in 2002.