SourceFire fids funding after sale was scuttled

In March a $255 million deal between SourceFire, which developed the open source program Snort - intrusion-detection sofware widely used in the defense community, and the Israeli company CheckPoint was scuttled in the wake of concerns over foreign ownership of sensitive US companies.

Now the Washington Post reports, SourceFire has bounced back to pick up $20 million in late-stage VC funding.

"By the end of it, we felt we were leaving quite a bit of money on the table," said CEO Wayne Jackson. "The company's value changed quite a bit during that time, and we started to see a lot of additional potential in the company as a stand-alone entity."

... "We've looked at dozens of security companies out there, and this is one of two or three that we've decided to invest in," said Mike Gordon, Meritech's managing director. "In this sector, it's very hard to get beyond a few initial customers and develop momentum, and Sourcefire has developed that momentum."

While Snort is open source, SourceFire's business is based on services and support for Snort.

The free Snort basically inspects traffic for potential threats to a network, but the money-making Snort adds to the technology by enabling it to make decisions about the flow of traffic and block attacks in networks on a global scale. Those added features, particularly the prevention aspects, are what companies and intelligence agencies find useful.

Most of the company's money comes from ready-to-use hardware loaded with Snort programs that sell for $6,000 to $125,000, depending on the rate of traffic it is capable of inspecting. The equipment fits directly into the customers' network. More money comes from distributing updates of Snort's detection rules in advance of their release on the Internet.

But the critical question is whether foreign ownership of companies built on open software is actually insecure.

"There's a mistaken perception that Check Point was buying Sourcefire for open-source Snort," Greg Young [of Gartner] said. But they were really buying them for the intellectual property they have around the commercial product, he said.