Bet on Proven Team at Okena Pays Off
The team at Okena, under the leadership of Shaun McConnon, was an experienced and cohesiveness group who had previously built Raptor Systems to an IPO and a successful acquisition in the firewall market. Starting another early stage security software company, in a crowded and complex market is always a challenge, but particularly in 2001 when the venture industry had largely retreated from early stage financings.
However, the Okena team were familiar with the problems protecting computer networks and desk-tops and from intrusive and malicious software attacks. They had conceived the notion of intrusion prevention, using an approach of intervening with application execution actions to ensure only proper behavior. While antivirus, firewall and intrusion detection products provided some barrier of protection, none were invulnerable or easy to administer and all required attack signature data, so networks and computer users remained vulnerable to previously unknown attacks. Developing a new category in the massive and crowded security software industry was a daunting challenge, but Newbury's due diligence with major CIOs confirmed the potential effectiveness and novelty of their approach. In September 2001 Newbury partner Bruce Bauer co-led a $12.5 million investment and joined the Okena board along with Trevor Kienzle from GE Capital at the time.
The Company initially faced a very difficult sales environment. One week after closing, a retrenchment of the technology market began following the 9/11 tragedy. The Company was also offering technology in a category (Intrusion Prevention) that was not yet widely recognized, and had no established budget. Bruce and Trevor provided assistance in directing the Company's product positioning, helping the team stay focused on revenue business models for the enterprise rather than offering a free "lite" version over the Internet, and assisting with large early customer accounts. Newbury co-led a follow-on insider financing of $4 million in September 2002 as the Company made significant progress and the outside funding environment remained difficult.
Newbury supported management in building a meaningful and productive business development effort, which not only generated significant early revenues from key customers, but also led to strategic OEM discussions and ultimately an acquisition of the Company by Cisco Systems. Bruce worked closely with Shaun McConnon to negotiate terms agreeable among management, investors, and Cisco; and Trevor was involved with final deal execution negotiations with Cisco and management. In summary, the Company grew from zero sales to a run rate of approximately $16 million and was acquired a year and a half after the initial investment, for $154 million, providing a 6x return to Newbury.