Wireless security catches the eye of venture capitalists...
BY SCOTT TYLER SHAFER
The Red Herring
<<Wireless executives are chock-full of colorful anecdotes that illustrate the simplicity and promise of the wireless future. The most common and overused example has a corporate salesperson using a mobile device to access company figures back at the office in order to close a deal in Wichita, Kansas. Sounds like a snap—but it's not.
Several major obstacles, including security and network management, must be overcome first. These are the opportunities a slew of recently funded startups are actively pursuing. Vernier Networks, ReefEdge, NetMotion Wireless, and five others have pulled in a total of about $100 million in venture funding, including $48 million this year, according to Thomson Financial/Venture Economics. And more money will be doled out, as venture capitalists say they are continuing to look for new companies tackling the messy security, infrastructure, and connectivity issues that hamper wireless adoption.
"Wireless security is a very broad area, but that is what makes it interesting," says Crispin Vicars, an associate at Charles River Ventures, a VC firm in Waltham, Massachusetts. "Lots of approaches means that there are a lot of opportunities for investment and the creation of unique companies." One such opportunity would be to solve the recently well-publicized security shortcomings of the 802.11b wireless protocol.
The standard 802.11b, which is used in wireless local area networks (LANs) to transmit data between a wireless device and a standard enterprise LAN, has a security element called wired equivalent privacy, or WEP. In February, a group of computer scientists at the University of California at Berkeley found WEP to be flawed. In a report, they describe how easily data transmitted over a wireless LAN could be intercepted and decoded.
Vernier, the first company spun off from Judy Estrin's technology incubator, Packet Design, has developed software that allows managers to integrate their wireless LANs with their existing LANs. The software enables network administrators to connect employees wirelessly to the LANs and to assign them access based on a device, rather than a physical location. It sounds simple, but it requires authentication, encryption, and a host of other security technologies. Douglas Klein, CEO of Vernier, describes the technology as a distributed firewall system. "Security and management need to be based on users, rather than physical location," he says. In June, Vernier, based in Mountain View, California, received $8.5 million in funding from its lead investor, Foundation Capital, along with Doll Capital Management, Masthead Venture Partners, and Weber Capital Management.
Much like Vernier, ReefEdge allows a network manager to assign privileges and provide uninterrupted wireless LAN access within a campus. The company, based in Fort Lee, New Jersey, has received $21.8 million in venture capital since its founding in June 2000, including $15 million at a post-money valuation of $40 million in July. RRE Ventures and Allegra Partners led the round, followed by Bessemer Venture Partners and Columbia Capital. "There is a great opportunity with security and network management over the next two years, as the wireless LAN emerges over the WAN [wide area network]," says Jay Markley, a partner at Columbia and a board member of ReefEdge.
VCs are also bullish on startups creating key technologies for road warriors to securely access their corporate networks beyond the enterprise. One player in this sector is Fiberlink Communications, a company based in Blue Bell, Pennsylvania, developing software for mobile devices to access virtual private networks securely. It raised $27.5 million in December from Goldman Sachs and three venture firms.
In a similar vein, NetMotion lets employees roam off campus with laptops and other mobile devices and remain securely connected to a corporate WAN over a variety of wireless protocols, including 802.11, GSM, and CDMA. The Seattle company pulled in $8 million in March from four VCs, including Northwest Venture Associates.
You can be sure that the money will continue to flow into wireless security, since the number of mobile professionals is likely to reach 55 million in the United States by 2004, according to IDC, a market research firm. And one of those millions is the sales guy out in Wichita who's counting on closing some deals while cruising around in his Ford Taurus.>> |
