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Technology Stocks : Son of SAN - Storage Networking Technologies -- Ignore unavailable to you. Want to Upgrade?

To: Joe Wagner who wrote (4779)	3/15/2005 1:01:35 PM
From: stockman_scott	Respond to of 4808

Information Lifecycle Management: Why Bother? networkmagazine.com

To: Joe Wagner who wrote (4779)	3/15/2005 1:21:00 PM
From: stockman_scott	Respond to of 4808

NeoScale gets $10M ________________________ by Clifford Carlsen TheDeal.com 14, March 2005 Heightened risk associated with compliance and storage software netted security developer NeoScale Systems Inc. an additional $10 million in venture capital, bringing total funding in the 5-year-old company to $43 million. Palo Alto, Calif.-based Advanced Technology Ventures led the $10 million Series D round — which is expected to take NeoScale to cash flow positive status — with existing investors Bay Partners of Cupertino, Calif., Lightspeed Venture Partners of Menlo Park, Calif., and Palo Alto-based Sevin Rosen Funds also participating. NeoScale CEO Barbara Nelson said a convergence of investor interest in protecting network systems and in meeting new compliance requirements equated to a successful funding round for the Milpitas, Calif., company. She declined to disclose a valuation on the new investment, saying only that it was an increase over the company's Series C round. NeoScale did not use a financial adviser for the deal, but turned to Warren Lazarow in the Menlo Park office of O'Melveny & Myers LLP for legal counsel. The investor group was represented by Dan Dorosin of Fenwick & West LLP in Mountain View, Calif. According to Nelson, greater need for access to stored data and increased requirements for retained data have created a new market for NeoScale's products. The company makes network appliances that encrypt data stored on tapes, disks and in Storage Area Networks (SANs). Its products work on a "bump in the wire" basis, encrypting data in real time as it passes over the network. "The market was very nascent when I joined the company in October 2003, but I've seen a pretty dramatic increase in demand," Nelson said. "Storage is overcrowded, security is overcrowded. But combined products is a pretty hot space." Wes Raffel, a general partner at Advanced Technology Ventures, said his firm chose to lead the new investment round because they consider NeoScale to be the undisputed leader in this emerging market. "The trend in the market relative to compliance issues requires people to encrypt data at rest," Raffel said, referring to data that is stored in a database or another medium that's not traversing the network. "NeoScale has the best solution to that need, and this round means they have the capability of taking the company to positive cash flow without any additional funding." Barry Eggers, a general partner with Lightspeed, said the company was born out of a growing interest in providing security for data at rest, recognizing that new ways of handling stored data would create greater risk of loss or theft. Lightspeed, which backed NeoScale's $13 million Series A round in January 2001, was an early investor in SAN pioneer Brocade Communications Systems Inc. of San Jose, Calif. and Eggers saw in NeoScale the opportunity to create another layer of security. Milford, Mass.-based Enterprise Strategy Group senior analyst Jon Oltsik said NeoScale was one of the first companies to launch a dedicated security product for "at rest" data just as the market began to emerge. "Now that there is so much more data and so many ways to get to it, the process of encrypting stored data is slowly picking up steam," Oltsik said. "The appliance concept [which NeoScale utilizes] is quite popular, and even though it is still a relatively small market, NeoScale has done a great job over the last year of getting people to know who they are."