May 23–RALEIGH, N.C.–Network security company CipherOptics has completed its second round of financing with $9.6 million coming from an existing backer and some new investors.
CipherOptics, formed in 2000, will spend the money on sales, marketing and the development of new products.
Ron Willis, CipherOptics’ chief executive officer, said raising money from outside investors was actually easier this year than it was in 2002 when the company got $5 million, its first venture capital.
“We’re in a revenue phase now,” Willis said. “We have customers, we have partners they can talk to.”
Investors in the round are all from outside North Carolina. They include Kodiak Venture Partners of Waltham, Mass., a repeat CipherOptics investor. Other backers include Origin Partners of Natick, Mass., and Axiom Venture Partners of Hartford, Conn.
Willis said 43-employee CipherOptics will likely add four or five employees over the next nine months. He expects revenue of between $5 million and $10 million this year, CipherOptics’ first full year with a product to market.
CipherOptics sells hardware used to encrypt data, securing it before it travels across high-speed networks. By moving the encryption process off the router — computers that direct network traffic — CipherOptics makes data security faster and easier. Its target markets include the health care and financial industries and the government.
“In the government market, there is money now being released” for cybersecurity programs, said Scott Palmquist, vice president of product management. “Last year, the budget conversation was happening but there wasn’t money available.”
CipherOptics spent last year recruiting resellers and distributors of its CipherOptics Security Gateway — the recommended price is $30,000 — which became available in August. The company is also talking to potential partners who would reuse the technology in their own products.
Ilan Carmi, a venture capitalist with Kodiak who serves as CipherOptics’ chairman, said his firm plans to make additional investment in the Triangle. “We definitely want to expand our involvement there,” Carmi said. “That area has a lot of potential.”
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