Alert Logic Goes After Mid-Tier

You're responsible for security in a small or mid-sized company. You don't have a staff, a hardened perimeter, or a big budget for security equipment. And even if you had the money, you don't have the time to implement and monitor sophisticated security tools. So what do you do?

If your first answer was "pray," you may want to take a look at a startup company called Alert Logic Inc. , which offers security services targeted at small and medium business. The fledgling service provider, which received $5 million in second-round venture funding earlier today, has doubled its customer base in the last 12 months and is beginning to get some notice from both users and investors.

Alert Logic's business model is simple: Instead of asking enterprises to buy security gear and install it themselves, the startup deploys its own appliances on the customer premises and then offers monitoring and analysis services to help prevent internal and external attacks. The service starts at less than $1,000 a month -- less than a tenth of what an intrusion detection system can cost.

"There is a lot of great security technology out there, but unfortunately, most of it takes a lot of time and money to deploy and maintain," observes Chris Smith, director of marketing at Alert Logic. "There needs to be something for companies that don't have those resources."

For a monthly fee, Alert Logic installs its own appliances on the customer's network and passively monitors traffic to look for anomalies, malware, or attempted connections with known trouble sites, Smith explains. If the service provider detects a problem, a security analyst will either alert the customer or actively quarantine the threat, depending on what the customer chooses.

"We have some customers that don't want us to get involved in remediation -- they just want our help with monitoring," Smith says. "In other cases, they want us to do as much as possible."

The service-based model is a good one for the mid-tier market, which is underserved by security hardware and software vendors vying to penetrate the largest accounts, observers say.

"We look for companies with a sustainable competitive advantage, as well as a motivated management team, and Alert Logic excels in both areas," says Steve Coffey, managing director of Hunt Ventures, one of the primary investors in Alert Logic's new round of funding. "By successfully delivering IT network security on the software-as-a-service model, Alert Logic is able to protect mid-size companies at a fraction of the deployment time and total cost of traditional solutions."

DFJ Mercury, OCA Ventures, and Access Venture Partners are the other three venture companies investing in Alert Logic.

Alert Logic raised a little more than $2 million in its initial round of funding nine months ago, but business has been growing quickly, from about 50 customers in 2005 to more than 100 today. About half its revenue comes from hosting companies and managed services providers, such as CyrusOne, that bundle Alert Logic's offerings in with their own as an extra service, Smith says.

While Alert Logic will continue to court service provider partners, it also is working on a service that will help mid-sized companies conduct security audits and vulnerability assessment to aid in regulatory compliance efforts, Smith says. A new, compliance-oriented service is slated to be unveiled in about two weeks.

— Tim Wilson, Site Editor, Dark Reading