Reflex Security raises $12 million for growth
Atlanta Business Chronicle - by Justin Rubner Staff Writer
In the late 1990s, then Georgia Tech student Hezi Moore came up to his college professor with a novel idea for a business. Why, Moore asked, couldn't a network security company prevent cyber-attacks -- instead of just detecting them?
The prevailing thought at the time was that an intrusion prevention system, like the one Moore wanted to create, would inadvertently prevent legitimate traffic from coming in, and ultimately prevent customers from signing on.
Even the professor, himself an entrepreneur, said Moore's idea would never work.
Moore, on the other hand, bucked the trend and, in 2000, formed Reflex Security Inc., an Atlanta company that beat competitors Internet Security Systems Inc., Juniper Networks Inc. and others to market with one of the first intrusion prevention systems in the country.
"I couldn't imagine a military operating with binoculars and without guns," said Moore, a former Israeli Army office.
The company has since deployed 1,000 systems and just raised $12 million in private equity to fund more growth.
Leading the round was private equity firm Spencer Trask Ventures Inc. The firm, based in New York City, specializes in emerging technology businesses. Joining the round are the founders of Atlanta-based pest control company Rollins Inc. (NYSE: ROL). The Rollins family, which includes Chairman R. Randall Rollins and Gary Rollins, made the investment through holding company RFT Investment Co.
To date, Reflex has raised $19 million.
Flush with cash, Reflex will be expanding into a growing $1.8 billion intrusion prevention market, which is expected to grow through 2009. By 2010, Gartner Research predicts, the market will grow into a $2.4 billion industry.
The company also enters an environment of increased cybercrime. In 2005, the U.S. Department of the Treasury says, the cybercrime business overtook the North American drug trade. Last year, cybercriminals turned their skills into a $180 billion empire.
Chris Hovis, a security research analyst at investment bank Morgan Keegan & Co. Inc. and a former executive at Atlanta-based security provider Lancope Inc., says there was a great deal of skepticism about intrusion prevention in the early 2000s. But with the recent influx of sophisticated attacks and advances in computing technology, intrusion prevention has become a thriving business. Even ISS, a pioneer in the network security industry, entered the game later.
"It's a concept that has always made sense," Hovis said. "But the technology has not always been there. It's a complex problem to solve what is good traffic versus what is bad."
Reflex sells its software and modified off-the-shelf hardware to the manufacturing, banking, health-care, education and high-tech industries. Some customers include Fidelity Bank, Major League Baseball, The University of Georgia and the Department of Defense.
Although Reflex was one of the first to market with intrusion prevention, the company now faces formidable competition, including Cisco Systems Inc. (Nasdaq: CSCO), ISS (Nasdaq: ISSX) and 3Com Corp. (Nasdaq: COMS), to name a few.
But now CEO Jim Watson believes the company has another technology to compete with. As more companies start to use virtual networks, Reflex is rolling out what it says is the first technology to prevent attacks on them. The system is being tested by select clients and is expected to be sold in the first quarter.
Watson says the intrusion prevention industry has yet to produce a clear leader. As a result, he believes Reflex could be a good initial public offering candidate within three years.
Reach Rubner at jrubner@bizjournals.com.
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