Hacker startup joins e-security market

CAMBRIDGE, Mass. -- Armed with $10 million in venture funding and a phalanx of Internet industry veterans, startup firm AtStake Inc. on Thursday announced plans to help secure the e-commerce revolution.

AtStake also said on Thursday that L0pht Heavy Industries, a computer "hacker" think tank, has merged with the newly formed firm to serve as its research and development arm.

AtStake said it hopes to win a chunk of the network security consulting and management services business that IDC Research expects to be worth $1.6 billion in 2002.

Concern for security With the threat of the Y2K computer bug in the past, security "is the fundamental hurdle that companies have to clear" if they want to participate in electronic commerce, said Ted Julian, AtStake vice president of marketing and a former analyst at Forrester Research.

Other executives include Chief Technology Officer Daniel Greer, a former executive at CertCo; a research and development chief known as "Mudge," who headed L0pht; and Phil Tams, previously of Cambridge Technology Partners (Nasdaq: CATP).

AtStake on Thursday said it had secured more than $10 million in funding from Battery Ventures -- which helped finance recent stock market star Akamai Technologies (Nasdaq: AKAM).

"They're going after what I would say is a lucrative market," said analyst Charles Rutstein of Forrester Research. "The challenge is in beating back the big incumbents."

Those incumbents include big accounting and consulting firms, such as KPMG Peat Marwick and PricewaterhouseCoopers, and vendors that also sell services to their customers, analysts said.

While those firms may have the advantage of existing customer relationships, AtStake said it hopes to leverage its role as a third-party provider focusing exclusively on security services.

Rutstein said AtStake will need to cultivate so-called "greenfield" clients -- such as a firm that is newly establishing an e-commerce site -- in order to thrive.

AtStake declined to identify prospective clients. The firm has 28 employees, a number it hopes to double or triple this year, Julian said.

IDC analyst Abner Germanow said the market is ripe for AtStake because network security is so complex and so crucial. Demand exists, he said. The question is how quickly AtStake can ramp up its business to support that demand.