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Webroot Software – Profile

February 7, 2005

webrootlogo.gif
HQ: Boulder, CA
Founded: 1997
Management: Co-founders’ cute story is bound to be perpetuated in the media as this company grows. CTO/co-founder Thomas claims that the FBI confiscated his PC when he was a teenager for hacking sensitive sites. He was hired by the father of Kristin Talley, his co-founder, to audit the security system at the Office of Oversight at the U.S. Department of Energy. There he was led from the dark-side, hacking, to the side of goodness, killing spyware.
Investors: In February 2005, the company raised, hold on to your chair, $108M in Series A from Technology Crossover Ventures, Accel Partners and Mayfield. The company decided to put off an IPO and take this huge round. The founders will pocket some of the investment.
Business Model: Webroot’s main product is SpySweeper, a $30 consumer software program that has won top ratings from PC Magazine three years in a row. Software is sold via ISPs like Earthlink and MSN as well as retail channels like BestBuy and Wal-Mart. It also sells an enterprise version, which now accounts for about 30% of business. The research firm IDC estimates sales of anti-spyware will grow from $12M in 2003 to $305M in 2008. SpySweeper is one of the top 10 best selling software applications.
Competitors: The heavyweights include Computer Associates International, which bought PestPatrol last year; Microsoft, which bought Giant Software; and the antivirus companies McAfee and Symantec, which have mounted their own anti-spyware efforts.
Dirt: This is a tremendously fast growing sector, and Webroot can certainly claim a pole position. One obstacle Webroot must overcome is that most consumers, and many corporations, prefer to buy an all-inclusive product when it comes to dealing with software threats from the Internet. McAfee, Symantec, CA and Microsoft can do this, while Webroot’s focus is really just on the spyware segment. The CEO told Forbes that he thinks the company has grown too much to be a good acquisition candidate. While the company doesn’t mention it, we believe that a good portion of this round will go to a legal war chest. A number of companies with legitimate claims that they are not spyware, such as WeatherBug and various consumer research apps, are picked up by spyware scanning apps causing millions of dollars in losses to these companies. Also, the company recently quit The COAST (Consortium For Anti-Spyware Technology), which makes sense as that group hoped to create industry standards – and those standards would probably benefit Webroot’s larger competitors, more than they would Webroot.

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