Pando

How the legends who built Boston's tech industry are still outpacing their younger rivals

By Dennis Keohane , written on June 26, 2015

From The Venture Capital Desk

You don’t have to be a sweatshirt wearing, drone-flying, Apple Watch wearing, Blue Bottle Coffee drinking twenty-something to be a player in the startup world.

In fact, there are plenty of older, experienced hands who are outpacing their younger rivals to raise big venture capital rounds.

One such figure is Shaun McConnon, the chief executive of the security rating company BitSight, which announced this week that it has raised $23 million in Series B funding.

McConnon is one of these guys that you bump into on a street in Boston and assume he’s some sort of old salt dog or Southie life-longer. Only later do you find out he’s one of the under-the-radar legends of the tech industry.

There are lots of guys like this in the city. Dan Bricklin, who invented a little thing called the spreadsheet, is an almost constant presence at tech meetups. Bob Metcalfe is around the city a fair amount too, usually in some speaking capacity; he only created the first ethernet cable. As for John Cullinane, his namesake company, Cullinet, was only the first software company to go public, the first to be listed on the NYSE, and the first to be worth $1 billion.

Many of these guys should have statues built for the role they played in computing, networks, and software. Instead, you can often find them at hanging out at one of many local tech events, waiting to impart wisdom on the next unsuspecting “networker” who has no idea just how important the old guy sitting by the bar is to the existence of the entire computing and Internet system that we often take for granted.

Although McConnon didn’t invent anything as revolutionary as ethernet cables or the spreadsheet, McConnon’s track record as a cybersecurity CEO might be unparalleled. He has been in charge of three different companies that were eventually acquired. Together, the sales of all three surpass $1 billion; and mind you, this happened long before the current frothy sea of unicorn valuations we see today.

McConnon’s career is also a living history of the computer industry and the dawn of cybersecurity. Starting out with legendary Boston minicomputer company Data General, he ended up running the East Coast sales team at Sun Microsystems.

Later, McConnon was asked to step in as CEO for the Greylock-backed early day firewall company Raptor Systems, which went public in 1996 and was later acquired by Axent -- which was in turn acquired by Symantec in 2000.

But McConnon wasn't done. Next he was brought on to lead malware prevention company Okena, which he sold to Cisco for $154 million. After Okena, he worked at the network security software company Q1 Labs, which was sold to IBM for more than $500 million.

Eventually, McConnon connected with Stephen Boyer and Nagarjuna Vennathe, the founders of another security play based on the outskirts of Cambridge called BitSight. McConnon quickly found himself in another chief executive role and, before the company even launched out of stealth, it had already secured $25 million in funding.

BitSight has developed a system for analyzing and grading any organization’s security performance, and its product is used by enterprises in a wide array of industries. BitSight assigns these organizations a composite score for security risk. And in this era of multi-channel business dealings, widespread use of APIs, and data hacking, this score is a straightforward way for companies to gain insight into how secure its partners, vendors, or even potential acquisitions may be. If you are going to let another business into your network or computing system in the current climate of information theft, having a way to assess how their own security stacks up seems not only like smart business, but a vital necessity.

BitSight’s latest $23 million round, announced earlier this week, was led by strategic partner Comcast and joined by previous investors Menlo Ventures, Globespan Capital Partners, Commonwealth Capital Ventures, and Flybridge Capital Partners. McConnon himself has also invested in the company.

What makes the BitSight so interesting -- other than the fact that it has created a FICO-like system to grade any enterprise’s security operations, using only publicly available data -- is that although it raised this second round of funding, it actually didn’t need the money, according to Flybridge’s David Aronoff.

When I saw that the company had raised less in its Series B than it did in its Series A, little alarm bells started to go. Optically, if you are going to follow some statrup 101 playbook, the Series B should be almost double the Series A -- mainly for perception's sake, no matter what a company’s valuation might be. Aronoff said that BitSight only wanted to raise around $15 million or so, but due to a valuation that has grown even further into the hundreds of millions -- which he wouldn’t disclose -- they had to raise more money than they initially planned.

As Aronoff put it, “This round was way oversubscribed.”

Part of the reason for that is McConnon, whom Aronoff met 20 years ago. Aranoff said he is still in awe that McConnon sits on the board of one of his companies.

“He’s not someone who seeks the limelight,” Aronoff said of McConnon. “He’s got this playbook that he adjusts to suit the company’s needs. Once they lock on a product/market fit, it’s just an execution play from there."