Network Companies Secure Nearly $20 Million in VC Cash

Network World — Despite the economic downturn, investment firms are putting their faith and funding into network start-ups that promise to help corporate IT better manage application performance, virtual systems and information.

While many companies consider layoffs and other cost-cutting measures, ExtraHop Networks, Reflex Systems and StoredIQ are securing venture capital funding, which could help them grow their companies during the recession.

Take ExtraHop, for instance. The start-up develops technology that it says will help IT managers reduce the time it takes to diagnose and fix performance problems. With US$5.1 million in a Series A round of funding, the company will accelerate its growth and add more customers.

"In this economic climate, the ExtraHop network- and application-management solution brings compelling value to IT organizations looking to lower cost and improve delivery quality," said Matt McIlwain, managing director at Madrona Venture Group, which led the funding. Other angel investors include Marc Andreessen and Ben Horowitz, former CEO of Opsware and senior vice president of software at HP.

"The team has demonstrated strong traction in the marketplace by successfully launching ExtraHop's flagship product in late 2008 and securing numerous customer wins," McIlwain said in a statement.

Reflex Systems also garnered venture cash for its virtual systems management and security offerings. The company secured $8.5 million in a first round of funding from RFA Management Company, an Atlanta-based private investment firm. With many CIOs planning to invest in virtualization technology this year, Reflex's tools to manage and secure virtual machines will also be in demand, according to investors.

"We believe the company is well-positioned to capitalize on the tremendous growth happening in the virtualization market as companies realize the cost and efficiency savings of adopting virtualization more broadly across the enterprise," said Don Carson, President of RFA, in a statement.

And StoredIQ added to the $6 million in funding it previously secured with another $8 million investment from S3 Ventures and Techxas Ventures. The eDiscovery and information management company said it plans to use the funding to take advantage of potential $4 billion e-discovery market.

"StoredIQ's product offering is unique, because it provides a unified, easy to deploy platform that meets the compliance, eDiscovery and information management requirements in the enterprise, while contributing to immediate cost and risk reductions," said Christine Taylor, an analyst with Taneja Group, in a statement.