Friday, October 17, 2008

V.i. Labs lands $4M in latest funding round

By Christopher Calnan

Security software maker V.i. Laboratories Inc. has closed a $4 million extension to their Series B round of funding that the company plans to use to market its latest anti-piracy software. The funding, from Ascent Venture Partners of Boston, and Core Capital Partners of Washington, D.C., increases total capital raised by Waltham-based V.i. Laboratories to $14 million.

The new product, called CodeArmor Intelligence, which was released last month, is embedded in software and designed to report back to its developers via the Internet when it is being used unlawfully, CEO Joseph Noonan said. The approach is expected to generate additional revenue for customers by re-capturing unlicensed use of intellectual property, he said.

“It’s LoJack for software,” Noonan said.

The 28-person V.i. Laboratories, which was launched in 2005, develops software that protects against the misappropriation and theft of intellectual property in applications. Competitors include Virginia-based Cloakware Inc.

The privately held V.i. Laboratories was founded by serial entrepreneur David Pensak. In June 2006, the company received a $2 million Series A round of funding from Rockford Capital, a Delaware-based private equity group. In 2007, it received $8 million Series B round of funding that included participation by Rockford Capital and Ascent Venture Partners.

Pensak began developing network security software in the 1980s at Delaware-based E. I. du Pont de Nemours and Co. (NYSE: DD), where he was the chief computer scientist. His supervisors weren’t interested in the technology, so Pensak started his first company, Raptor Systems Inc. Raptor produced commercial Internet firewalls and was acquired for $250 million in 1998 by Axent Technologies Inc., which in turn was purchased by Symantec Corp.

The following year, Pensak started Lexington-based Authentica Inc., which was acquired by EMC Corp. in 2006 for an undisclosed amount.

About 20 percent of the software sold in the United States is pirated, according to the Washington D.C.-based Business Software Alliance.

Ascent Venture Partners is raising a nearly $200 million fund as part of its fifth fund, according to published reports. Ascent, founded in 1985, focuses on early-stage investments on the East Coast. In 2003, it closed its fourth fund, which totaled $140 million.

Other Ascent investments include Marlborough-based Concord Communications Inc., a maker of network-management software; Hologic Inc. of Bedford, which makes medical-imaging equipment; and Burlington-based Bluesocket Inc.