Security Startup Bucks Conventional Wisdom, Finds Fresh Funding

Despite the tough economy, security startup Palo Alto Networks Monday said it has expanded its latest round of financing, bringing in an additional $10 million in venture funding.

Palo Alto makes a line of firewall appliances that it positions as next-generation security technology that was built from the ground up to deal with Web applications such as Skype, instant messaging, video, SAAS and other software designed to circumvent traditional firewalls.

The new money increases the company's Series C round of funding, announced in August, to a total of $36 million. Overall, backers have provided $64 million in funding to the company so far.

Palo Alto Networks was founded in 2005 and began shipping its first product in June, 2007.

The new funding was led by JAFCO Ventures and includes investments from JAIC and Northgate Capital.

"It used to be that an application such as e-mail could be blocked or protected on the network because you knew it came through a specific port on the firewall, say Port 80, but an application such as Skype or an instant messaging application have really been designed to get around the typical firewall structure," said Lane Bess, president and CEO of Palo Alto, Sunnyvale, Calif., in an interview last month with ChannelWeb.

Palo Alto's products use deep-packet inspection to offer not only features of traditional firewalls but also capabilities such as policy management, URL filtering, threat filtering and "very granular visibility," Bess added.

Jim Vanderzon, president of Chevy Chase, Md.-based solution provider Sun Management, said Palo Alto offers a simpler, more powerful solution than rivals such as Juniper Networks or Cisco Systems that are bolting other features onto their legacy firewall technology.

"I liken it to attaching a wagon to a Corvette and calling it a pick-up truck," Vanderzon said of other vendors' firewall offerings. "Palo Alto can fully understand the application and make a determination off of that [as to how to deal with the traffic]," he said.

Palo Alto has been generating buzz for both its technology and its recent executive appointments.

Bess left his role as executive vice president of global sales at Trend Micro to join Palo Alto in July. He was followed shortly thereafter by Nancy Reynolds, Trend Micro's channel chief, who left to join Bess at Palo Alto in September.

Bess said he hopes to take the company public via an IPO three years from now.

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