Arik Hesseldahl

Recent Posts by Arik Hesseldahl

CipherCloud Lands $30 Million From Andreessen Horowitz

One of the biggest ongoing concerns in the adoption of cloud computing options by large enterprises is security. When you get right down to it, moving data to a cloud application largely means putting it, or copies of it, outside the trusted corporate firewall.

There aren’t many ways to alleviate that concern, but cloud companies, whether service providers like Amazon Web Services or application providers like Salesforce.com, have a pretty strong motivation to do everything they can to lock down their systems and prevent intrusions. And yet the concerns linger.

CipherCloud is a start-up that has come up with an interesting solution to the problem, which comes down to this: Its customers place a secure gateway — it’s a virtual appliance that runs on the customer’s own on-premise hardware — that encrypts data that gets placed in the cloud. It works with several widely used cloud services as well, including Amazon, Salesforce.com’s Chatter and Force.com, Google’s Gmail and Microsoft’s Office 365. It has 40 enterprise customers and 1.2 million end users.

The company said today that it has secured $30 million in VC funding in a round led by Andreessen Horowitz. Also investing in the round are Index Ventures and T-Systems, the venture capital arm of the German telecommunications concern Deutsche Telekom. AH had previously been among CipherCloud’s seed investors.

John M. Jack, a newly named board partner at AH, will join CipherCloud’s board. Jack is the former CEO of Fortify Software, which he sold to Hewlett-Packard in 2010. Before that, he was CEO at Covalent, which in 2008 was acquired by SpringSource, which was itself ultimately acquired by VMware in 2009. And before that, he was COO at Vantive, which was acquired by PeopleSoft in 1999, and is now part of Oracle.

Jack said one of the things that impressed him and the team at AH was the fact that users never really know their data is being encrypted as it comes and goes from the cloud applications. “They use their applications as they normally would with no impact to them,” he said. “Rarely do you see a company like CipherCloud that’s taking advantage of such a huge market opportunity.”

CipherCloud was started by Pravin Kothari, a founder of ArcSight, a security company acquired by HP in 2010 for $1.5 billion. He said one key trick that CipherCloud has up its sleeve is that in the act of carrying out the encryption, that application up in the cloud doesn’t break. Sometimes encryption will break the application, because it messes up the formatting of the data that the application is expecting, and also interferes with the ability to carry out basic things that users want to do on their cloud data, like searching. “We have some patents pending on ways to encrypt the data while preserving the formatting, and without interfering with searching and other tasks that users typically do,” Kothari told me.

The end result is that companies can get the benefit of shifting to cloud applications — which brings with it a lot of cost savings — without having to worry as much about data security. Cloud providers themselves can’t see the data, because the customer remains in control of their encryption keys.

The company can’t name any customers — security companies never do — but its customers include two of the five biggest banks. It has customers in eight countries and 10 different vertical industries.

CipherCloud is, by my count, AH’s third security investment. Founder Marc Andreessen hinted at the firm’s pivot toward security investments in an appearance at D: All Things Digital in 2011. Days later, it made an investment in Silver Tail Systems, which has since been acquired by EMC . Its other security investment is Bromium.


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