Newly Public Proofpoint Offers a View Into Cloud Security

Market researcher Canalys estimates that the worldwide enterprise security market will grow 8.7% this year to $22.9 billion worldwide. The anti-virus segment will retain the highest market share of the enterprise software market, contributing 11.3% of the total market value and reporting 6.8% growth over the year. Cloud security, in particular, is seeing significant adoption, and Proofpoint’s IPO indicates the beginning of several public offerings. Also in the pipeline is Qualys. Of course, the IPO pipeline for SaaS and cloud companies is significant right now. Many companies in the $75 million-$150 million range are waiting in the wings.

Proofpoint’s Financials
Recently listed Proofpoint is a provider of enterprise security software products for large and midsize companies. The company was founded in 2002 by the former CTO of Netscape, Eric Cahn. In my interview with CEO Gary Steele, he talks about the innovative use of cloud-based technologies in the security segment. Today, the company uses the cloud to deliver security for big-data analytics, machine learning, deep content inspection, and advanced encryption to protect against the latest threats while reducing the total-cost-of-ownership of these services. Proofpoint’s services help customers protect themselves against data theft, maintain regulatory compliance, and secure communication and archive emails and data.

Proofpoint sells software on a subscription basis and has a customer list of more than 2,400 enterprises, universities, and government agencies worldwide, including 26 Fortune 100 companies. Besides selling the software products itself, Proofpoint has also partnered with the likes of IBM, Microsoft, and VMWare to market them.

Proofpoint’s revenues have been rising steadily. Revenues grew from $48.5 million reported in 2009 to $64.8 million in 2010. The company ended fiscal 2011 with revenues of $81.8 million. However, they have yet to turn a profit. Losses widened from $19.7 million in 2009 to $20.9 million in 2010. Last year, losses fell marginally to $20.1 million.

Before listing on the Nasdaq under the ticker PFPT, Proofpoint had received $50 million in venture funding from investors, including Jafco Ventures, RRE Ventures, Inventures Group, Benchmark Capital, Bridgescale Partners, Mohr Davidow Ventures, Meritech Capital Partners and DAG Ventures. In December 2011, they filed their S-1 to raise $50 million in funding.

Proofpoint’s Expanding Product Portfolio
Proofpoint has been successfully expanding their security offerings to cater to the current market trends. Last quarter, they released new governance capabilities that help their customers benefit from cloud-based file sharing and collaborating on social media platforms while addressing concerns about data security, compliance, and information governance. They announced integration with Box, a pioneer vendor in cloud based-file sharing and collaboration, to offer enhanced security, compliance, and control over documents shared via Box.

Proofpoint also expanded its reach within the mobile segment by releasing the Proofpoint Android app that lets mobile device users search for and retrieve archived e-mails stored in the Proofpoint Enterprise Archive. Proofpoint also simplified the decryption service on the app by enabling a single-click message decryption for smart phones and tablets.

Proofpoint priced its IPO at $13 a share, pegging the company’s valuation at $468 million. The stock is trading at $13.82 after reaching $17.11 soon after listing.