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SOMETHING VENTURED: Venture Capitalists Set Sights on Cloud Security

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(This article was originally published Wednesday.)

--Venture capitalists are funding startups that can remove one of cloud computing's few remaining obstacles: data security. --Companies are worried about the security of data in the cloud --And many face government and industry regulations about how data can be stored in the cloud

By Scott Denne

As cloud computing continues to take a larger share of computing budgets, venture capitalists have been getting behind startups that can remove one of the movements few remaining obstacles: data security. Now one of Silicon Valley's most influential venture firms, Andreessen Horowitz, has followed up with more funding for one of its early seed investments in the space by leading a new $30 million round for CipherCloud Inc., a company that encrypts data in order to keep it secure. Other existing investors Index Ventures and T-Venture, the venture capital unit of Deutsche Telekom AG, also participated. "One of the problems I noticed in 2010 was all these enterprises wanted to adopt cloud applications," said Pravin Kothari, the company's chief executive and founder. "But the big problem they had was that they had no control over their data." John Jack, a board partner at Andreessen Horowitz, contemplated entering this market when he was CEO of Fortify Software Inc., a maker of application security testing software, but decided that it wasn't closely related to the core business and "we couldn't quite figure out in our minds how to solve the problem," he said. That hasn't stopped other startups from getting into the cloud encryption market. In February, Valutive Inc. raised $10 million in Series A funding for a similar service that's focused on cloud-based Microsoft applications, and Porticor Ltd., which makes an encryption service centered around Amazon.com Inc .'s cloud services, launched that same month with an undisclosed amount of funding. Last year PerspecSys Inc. raised an $8 million Series A from Intel Capital and others, and Salesforce.com Inc. acquired cloud encryption company Navajo Systems shortly after it raised seed funding from Jerusalem Venture Partners. Companies are not only worried about the security of critical data, like customer information, but many also face government and industry regulations about how the data can be stored when they're considering implementing cloud applications. CipherCloud 's service solves that problem by encrypting data before sending it out to a cloud application. CipherCloud provides encryption tools built around several specific applications, including Salesforce.com and Gmail, or a template for encrypting data for other applications and cloud services. Providing such a service may be a simple idea, but it's difficult to execute. The gateway that encrypts the data has to be extremely secure and support high levels of traffic for applications that are a crucial part of a business, Mr. Kothari

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said. Though CipherCloud 's latest round is technically its Series A round, the two-year-old company is well past that stage of development, Mr. Kothari said. It already has over 40 enterprise customers, 1.2 million people using the service and a revenue run-rate that's over $10 million, he said. As the market for cloud computing continues to grow, CipherCloud will grow with it, said Mr. Kothari, who previously founded ArcSight Inc . Research firm Gartner predicts that a quarter of enterprises will use cloud security applications by 2016. The same firm predicts the market for cloud computing to grow 20% this year to $109 billion. Prior to this round, CipherCloud raised $1.4 million in seed funding. Mr. Kothari declined to disclose the valuation on the round.

Write to Scott Denne at [email protected].

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(END) December 13, 2012 07:35 ET (12:35 GMT) DETAILS

Subject: Software; Funding; Data encryption; Cloud computing; Startups; Venture capital

Business indexing term: Subject: Startups Venture capital; Corporation: Salesforce Inc

Location: Silicon Valley-California; Jerusalem Israel; United States--US; Israel

Company / organization: Name: ArcSight Inc; NAICS: 513210; Name: PerspecSys Inc; NAICS: 513210; Name: Index Ventures; NAICS: 523910; Name: Microsoft Corp; NAICS: 334610, 513210; Name: CipherCloud Inc; NAICS: 513210; Name: Intel Capital; NAICS: 523910; Name: Jerusalem Venture Partners; NAICS: 523910; Name: Deutsche Telekom AG; NAICS: 517111, 517112; Name: Amazon.com Inc; NAICS: 334310, 454110, 518210; Name: Andreessen Horowitz; NAICS: 523910; Name: Fortify Software Inc; NAICS: 513210; Name: Salesforce Inc; NAICS: 513140, 513210, 541613

Publication title: Dow Jones Institutional News; New York

Publication year: 2012

Publication date: Dec 13, 2012

Publisher: Dow Jones &Company Inc.

Place of publication: New York

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Country of publication: United States

Publication subject: Business And Economics

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Document type: News

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