Stealthy vArmour raises $36 million in 9 months on the promise of reinventing hybrid cloud security

By Michael Carney , written on August 20, 2014

From The News Desk

Stealthy cybersecurity startup vArmour may or may not be best in class at protecting corporate networks from intrusion. It’s hard to tell either way when the company refuses to share any details about its product or clientele. But if the three-year-old company’s success at fundraising and board construction is any indication, this must be some seriously impressive tech.

VArmour today announced $36 million in combined Series B and C funding, raised a nine month span. The company’s $15 million Series B closed in December of 2013 and was led by Menlo Ventures. The company then received inbound interest from Columbus Nova Technology Partners (CNTP), Citi Ventures, and Work-Bench Ventures and decided to add another $21 million in funding this month, bringing its total funding to $42 million in the last 21 months.

“Like most companies, we were targeting a 15 to 24 month runway when raising our Series B round,” vArmour CEO Tim Eades says. “We got some fantastic traction in the marketplace and hired fantastic people to build great products. We could have stuck to that strategy, we weren’t capital constrained by any means. But getting the right partners and the right money is so important. To add Mohsen to our board, to add Cisco, we couldn’t say no to that. We’re doing this to build the most powerful company in this category.”

Eades later adds, “This is my third time as CEO, and it’s just something that should be burned into every entrepreneur’s brain – focus on getting the right people around the table. It’s like that book by James Collins, ‘Good to Great’ – “first who, then what.” People think that’s just about your employees, but it applies to your board too.”

It was just last month that vArmour announced the addition of not one, but two former Palo Alto Networks CEOs to its board of directors, with the appointment of Dave Stevens and Lane Bess. This latest funding round means the addition of Menlo general partner Pravin Vazirani and CNTP managing director Mohsen Moazami to its board. Moazami is a particularly strategic as a 12 year veteran of Cisco Systems, most recently as a Corporate VP of Strategy, Emerging Markets.

As if this weren’t enough experienced leadership, Eades himself is a marquee recruit to the company in the last year, as the former Silver Tail Systems CEO joined as CEO of vArmour in November. With Eades arrival co-founders Michael Shieh, formerly of NetScreen, and Roger Lian, formerly of NetScreen Juniper Networks Director, assumed the roles of CTO and VP of engineering respectively.

“We were desperately after Tim for one of our other portfolio companies – he was our number one choice as CEO. So when we failed to secure him, we were curious, where was he going that he said no to such a compelling offer,” Moazami says. “That was my first encounter with vArmour. But I can tell you, every year I was at Cisco I attended a conference of the world’s 130 to CIOs and no matter the year, security was the No. 1 concern and the No. 1 area of investment. No one wants to wake up and be in WSJ for the wrong reasons.”

VArmour may be stealthy, but the company has paying customers around the world, according to Eades. It’s just not ready to name them, for reasons best described as a combination of security and modesty.

“We just feel that it’s more appropriate to build the compass of a company, the culture before launching publicly,” Eades says. “We view it as a case of doing it right, not right now. Our customers are already our best advocates in the industry, so we’re not hurting.”

It’s hard to handicap vArmour relative to the competition without more information on its product. The company will only say that it is offering solutions for “the virtualized, cloud, software defined world that we now live in, where attackers routinely spend an average of 248 days inside a corporate network before being detected.” Moazami further adds that the product enables clients to understand how traffic flows in a corporate network to better identify and prevent attacks.

Despite its apparent early success, VArmour will still face the classic scaling challenges of any enterprise software company. And while more cash always helps, there’s no substitute for great execution. In addition to continuing to refine its product, the company will need to scale up its sales and customer success teams in order to serve the world’s largest and most demanding software buyers. In cybersecurity in particular, that often means dealing with large banks, the department of defense, and other sensitive industries. VArmour has hired nearly 70 salespeople this year, according to Eades

“The go-to-market strategy is a mixture of art and science,” Eades says. “You need to white glove the first 30 to 50 customers and make sure the compass of company is focused on the customer. After scale, it’s different, but I’ve done this before at Silver Tail. We’ll need extremely good product management and engineering. Startups die of indigestion not starvation. Growth is exceptional right now and we just want to make sure we continue serve the customers.”

Eades says that the most recent funding round should see vArmour through to profitability. But, like any good startup CEO, he doesn’t rule out the possibility of bringing in more cash “to fuel growth,” if the market opportunity justifies as much. VArmour has yet to make any acquisitions, but such inorganic growth may also be part of Eades’ market entry strategy, he says.

“Legacy companies are struggling to transform business models and the rhythm of their business is out of sync such that it that doesn’t serve customer well,” Eades says. “ There’s this massive transformation underway in security. Criminals now incredibly sophisticated, and the incumbents are leaving their customers exposed.”

VArmour plans to pull the curtain back and launch its product publicly in the fourth quarter. Until then, the only measuring stick we have is the names attached to the company. My that metric, this is no doubt a company to watch.