LogRhythm lands $40M more to continue rags to riches tale
oulder-based LogRhythm, already considered one of the fastest growing IT security firms in the country, has banked another $40 million in investment capital.
The new funding comes from a group of venture capital firms, led by Riverwood Capital and joined by Adams Street Partners, Westminster-based Access Venture Partners, Piper Jaffray Merchant Banking and some LogRhythm executives.
Executives say they will use the money to add technical staff, develop new products and expand sales and marketing operations.
LogRhythm offers products and services in the rapidly growing arena of SIEM — security information and event management. SIEM encompasses technology designed for real-time security monitoring, notification of breaches, analysis of event logs and other security-related capabilities.
LogRhythm’s Security Intelligence Platform automatically tracks activity on computer servers and looks for patterns and anomalies that might indicate security breaches. It also offers compliance automation and assurance.
The firm, at least thus far, is a rags to riches story if ever there was one. It was started in 2003 by a self-taught code jockey and a physics doctoral candidate.
Chris Petersen, today LogRhythm’s chief technology officer and a co-founder of the company, was laid off from Entrasys Networks, a network hardware and security supplier, in 2002. He was working as a product marketing manager when the SEC began an investigation of the company. With financial pressures mounting, the company went through multiple rounds of layoffs. Petersen was not associated with the SEC investigation in any way, but several former executives later went to jail for securities fraud.
Meanwhile, Phil Villella was working on his PhD in Condensed Matter Physics at the University of Colorado. He met Chris in Steamboat Springs after the now jobless Petersen went to Colorado “to clear his head.”
The two holed up at Petersen’s house in Washington, DC, nurturing the idea of starting a digital security firm. It wasn’t long before Petersen sold his house and the pair made the plunge into the perilous world of entrepreneurship. In 2004 they packed up and moved to Boulder. LogRhythm was born.
It wasn’t until 2008 that the company landed its first significant investment funding. In November of that year, Access Ventures Partners and High Country Venture put $3.3 million into the firm. After that, there was no looking back. The following April, LogRhythm banked another $3.1 million in investment funds. Two years later, in the spring of 2011, the firm received another $14.9 million in funding, followed by an additional $15 million in the summer of 2012.
The latest $40 million investment is by far the largest to date, bringing the total funding since the company’s founding to $76.3 million.
The steady stream of investment is not surprising in an age when cyber criminals are becoming increasingly sophisticated. High-profile cases, like the recent security breach at Target, have spawned renewed interest in high end security products and services. And LogRhythm is becoming a recognized leader in the SIEM arena. The company has earned a place in Gartner’s Magic Quadrant reports for the last three years.
“There’s a handful of software tech companies that have blossomed locally over the years, and it’s awesome to be part of that,” company CEO Andy Grolnick told the Denver Business Journal. “There’s not a ton of firms locally that reach the scale of growth that we have.”
LogRhythm employs 300 people worldwide, about 200 of which work locally. It has offices in England, Germany and France, with teams in Singapore and Australia. The company plans to add another 50 positions in the next year.
“LogRhythm is thriving in the security intelligence market on several fronts and has accelerated growth over the last year,” according to Jeff Parks, a partner of Riverwood Capital and the newest member of the LogRhythm board of directors.
What’s next for LogRhythm? Maybe an IPO. Says Grolnick: “Our clients say they like our focus. So, certainly, an IPO is a possibility in our future.”