Vormetric Raises $15M in Series C, Led By JK&B Capital

By Jonathan Matsey
4/19/2004

Vormetric, a developer of software and a server appliance to provide host protection, data access control, and data encryption, has raised a $15 million Series C round, the company told VentureWire.

New investor JK&B Capital led the round, joined by existing investors QTV Capital, Sigma Partners, and Vanguard Venture Partners. Bill Schroeder, president and chief executive officer of Vormetric, said that this is an up round. JK&B provided half of the round and the other three investors contributed pro rata.

Schroeder said that the funding will be used largely for sales, marketing, and customer service initiatives. It will also lead the company to cash-flow break-even, he said, a milestone he anticipates the company reaching in late 2005.

Schroeder said that the company began generating revenue from its sole product, the CoreGuard Data Security System, last September, and has gathered about a dozen paying customers and a few dozen more evaluating the product. Vormetric sells almost exclusively into the North American market, with a few sales in Europe. The company is concentrating mostly on the financial services, federal government, high tech, and media markets and is considering the pharmaceutical/biotech market. He said that most of these companies use CoreGuard for the protection of private personal data, confidential data, and intellectual property. CoreGuard comprises software and a server to provide host protection, fine-grain data access control, selective encryption of stored data, and audit and reporting.

During the remainder of the year, Schroeder said that the company will continue to work to improve CoreGuard, adding new functions such as additional platforms. CoreGuard currently supports Solarus, Linux, and Windows, and he said the company hopes to release an AIX version. Vormetric currently has applied for 13 patents and has received one. He said he hopes the company will receive two more by the year's end.

As a result of the financing, Marc Sokol, partner at JK&B, will join the board, which includes Schroeder; Duc Pham, co-founder and chief technology officer of Vormetric; Dan Eilers, general partner at Vanguard; Mark Pine, managing director at Sigma; and Steve Schlossareck, managing director at QTV.

Santa Clara, Calif.-based Vormetric was founded in January 2001 as Sotera Networks by Pham, Chief Scientist Tien Nguyen and Vice President of Partner Development Phil Grasso. Besides its California headquarters, the company also has a contracted design center in Vietnam, a move that Schroeder said is both economical, as Vietnamese programmers cost half of their counterparts in India, and in line with the company's history, because Pham and Nguyen are Vietnamese themselves.

Vormetric raised a Series A round of financing in July 2001 for $4 million led by Vanguard and joined by QTV and a Series B round in July 2002 for $13 million led by Sigma and joined by the Series A investors. Vormetric has about 50 employees and anticipates having around 60 by the end of the year, Schroeder said. He does not anticipate the company raising additional funding.

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