From December 10 issue of Canadian Business...
Hackers can look at Cloakware’s code, but can’t mess with it
Ask Fariborz (F. B.) Fallah what it’s like running a company in Iran, and he’ll tell you it’s all about jumping through hoops. Fallah—who spent most of the 1990s running his family’s construction company in Tehran—had to deal with pistachios and rug traders just to scrape together enough foreign currency to buy building supplies and equipment. Add to that the Gulf War, a non-existent capital pool, an unskilled labor force and the occasional US embargo, and doing business in Iran was a headache. These days, as president and CEO of Cloakware Corp., an Ottawa-based security software start-up, Fallah faces another kind of pain: selling a new technology to a skittish market. “I can’t say it’s easier doing business here,” says Fallah, 37. “But certain things are easier, like dealing with knowledgeable people. And capital is readily available—if your story clicks.”
Cloakware’s story begins the same as scores of Canadian tech companies: with a few former Nortelers. In 1997, Stanley Chow, Harold Johnson and Yuan Guan quit the networking giant after their project was shut down. The trio had come up with an encoder that effectively cloaks software code, making it more resistant to tampering and reverse engineering. Hackers can look at the code, but the technology helps prevent them from understanding how it works and making changes to it. “Species survive because there is genetic diversity,” says Fallah. “Not everybody reacts to the same virus the same way.” Cloakware, he says, gives software the genetic diversity it needs to withstand Net-based attacks like viruses and worms.
It’s a far cry from Estahban Cement and Shaloudeh Construction. Fallah first came to Canada with his mother and two younger brothers in 1977. (His father stayed behind to tie up loose ends, but got stuck in Iran after the Ayatollah Khomeini’s Islamic revolution in 1979.) Fallah attended Queen’s University in Kingston, Ont., where he earned a master’s in electrical engineering. In 1990—a year after Khomeini’s death—Fallah returned to Tehran to help run the family business, which now has annual revenue of about $30 million.
Nine years later, Fallah decided to strike out on his own. He returned to Canada and hooked up with Paul Litva, a tech analyst and fellow Queen’s grad. Litva was big on a small company called Cloakware, and in July 1999 they both signed on. (Litva is now vice-president of business development.) Fallah’s top priority has been raising cash. So far, he has raised $1.2 million from friends and family, and another US$3.1 million from RT Capital Management, Texas-based security vendor Entrust Inc. (which took a minority stake) and two tech venture funds.
Today, Cloakware has 25 employees and an advisory board led by security experts like Entrust cofounder Paul Van Oorschot and Edward Felten, director of the Security Internet Programming Laboratory at Princeton. And just to be sure Cloakware’s technology really works, Fallah has hired the Russian Academy of Science to try and crack it. It’s all part of Fallah’s plan to make Cloakware the de facto standard for protecting software and content. “Now more than ever,” he says, “security is a major issue in the minds of leaders, enterprises, all the way down to end users.”
With 23 patents pending, Cloakware has piqued considerable industry interest. Entrust and Certicom Corp., a US mobile security developer, are negotiating bundling agreements with the company. (Entrust will package the technology with its PDA e-mail security product; Certicom will include it with its virtual private network and public key infrastructure products.) Those deals will bring in a few hundred thousand dollars in one-time payments and licensing fees, but Fallah says the real money will start to flow when Entrust and Certicom ship those products because Cloakware charges a fee for each user and device. Eventually, Fallah hopes to sell CDs that allow people to cloak their own systems.The company has also released a software kit that lets developers replace passwords with handwritten signatures on stylus-based handhelds.
If there’s one thing Fallah learned from doing business in Iran, it’s that perseverance pays off. “There were several times when Iran got blacklisted and we were in the middle of negotiations with European companies to bring in equipment,” he says. “Everybody backed out, and we had to start all over again—find a new path.” That path has led Fallah all the way to Cloakware. Now he just has to make sure he’s headed in the right direction. |
