Elemental Scores Security Funding

Just weeks after emerging from stealth and launching its first product, Elemental Security Inc. has clinched $11 million in a C round of funding to help advance its security management strategy.

The cash influx brings Elementals total funding to $21 million. It was led by Lehman Brothers Venture Capital Group. Previous investors Bessemer Venture Partners, Mayfield, and Sequoia Capital also took part.

Elemental, based in San Mateo, Calif., was set up in December 2002 by Dan Farmer, a former security architect at Sun Microsystems Inc. (Nasdaq: SUNW) and Silicon Graphics Inc. (SGI) (NYSE: SGI), and Dayne Myers, a one-time consultant at McKinsey & Co. Farmer is now Elemental’s CTO and Myers is on the company’s board.

The startup’s story is about managing security across data center servers, desktops, and laptops. With the number of devices within a typical IT infrastructure growing, coordinating security is a major headache for IT managers, particularly in the era of Sarbanes-Oxley and the Health Insurance Portability and Accountability Act (HIPAA) (see Financial Security: Priceless).

Elemental proposes to help by extending security policies across the IT infrastructure, using specialized software. Dubbed the Compliance System, it includes agents for servers and security devices running under Windows, Linux, and Solaris operating systems. These agents are set up to roll out policies and check for unauthorized machines on the network. The software can limit access to specific application and file servers, or deny access to the entire network (see Elemental Intros Compliance System).Many IT managers complain that agent software complicates the management of data center servers. But Phil Schachter, vice president and services director at analyst firm Burton Group, believes that for this kind of security product, using software agents is actually beneficial. “Having a lightweight agent that installs on your machine means that you are not deploying enforcement appliances everywhere in your network,” he says.

Apart from the agent issue, Elemental faces competition from the likes of compliance specialists such as Symantec Corp. (Nasdaq: SYMC) and BindView Corp.

Despite the challenges, Elemental CEO Peter Watkins claims the vendor's foot is in the door with 30 to 40 potential customers. While acknowledging that most of these are pilot projects, he says the firm is "looking to convert some of these pilots into revenue in the next quarter."

At the moment, Elemental’s target markets are finance, healthcare, government, and the technology sector, which is often an early adopter of new products. In 12 months' time, however, Watkins is planning to expand into new areas such as manufacturing and education. International expansion is also on the cards.

There is also a product upgrade on the horizon, with the startup looking to expand its platform support to HP-UX, AIX, and the Mac OS before the end of the year.This is where the money comes in. Currently, Elemental has 35 employees and offices in San Mateo, Boston, and New York. But over the next 12 months, Watkins expects the workforce to grow to between 50 and 60, primarily in the areas of sales, technical support, and product development.

There could also be some U.S. expansion, notably in Ohio. “We’re looking at both the South and the Midwest,” says Watkins. “Probably one office could be in the D.C. area and one could be in the Ohio region... There’s a lot of manufacturing in Ohio. That’s where the money is.”

— James Rogers, Site Editor, Next-Gen Data Center Forum