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Auckland Software Start-up Esphion Raises $5Mn

Auckland Software Start-up Esphion Raises $5 Million in Venture Capital

Embargoed till 3 August

Auckland Software Start-up Esphion Raises $5 Million in Venture Capital

Auckland based start-up company Esphion Limited today announced that it had raised NZ$5 million in venture capital to fund the commercialisation of network products including security software targeted against cyber terrorists.

The investment, structured through a series of tranches and options, was led by TMT Ventures with follow-on investment by the company's existing investors, including the New Zealand Seed Fund and Stephen Tindall.

Esphion's core technology provides detailed analysis of Internet Protocol (IP) traffic carried over telecommunications networks. The key application is in network protection and the more efficient management of bandwidth usage and billing.

Esphion's first product, netDeFlect, protects against denial-of-service (DoS) attacks launched by cyber terrorists.

These attacks, aimed at crippling networks by flooding key connections with huge volumes of illegitimate traffic, are a large and growing threat to Internet traffic which can render sites inoperable and significantly increase bandwidth usage. There have been many high-profile examples of web sites being crashed by hackers, but the risk extends to any organisation linked to the Internet, including banks, government organisations, large enterprises and utilities.

Organisations in each of these sectors will be key customers for Esphion in addition to the infrastructure providers such as telcos, Internet Service Providers and router manufacturers. As DoS attacks increase both in their volume and complexity, organisations are becoming increasingly dependent on sophisticated responses such as that offered by Esphion.

Johnny Cates, chief executive and founding shareholder of Esphion, welcomed the successful capital raising.

"We're a young company with tremendous talent and have developed a unique technology for managing and protecting network traffic," he said today. "The capital and access to key corporates that TMT Ventures provides us is a key next step in implementing our sales strategy."

The company's major investor to date has been the New Zealand Seed Fund, whose manager, and Esphion chairman, Jerry Balter, commented that the Seed Fund had invested just over a year ago and provided the resource that allowed Esphion to complete its product development.

"It is an excellent outcome for the company that we have now been able to introduce a second venture capital partner to the company," he said. "Successful early stage investing is about getting like-minded venture firms to work together and leverage off each other's strengths."

Roderick Deane, chairman of the Seed Fund, added that " this marks the first second stage investment into a Seed Fund backed company. We are especially pleased that a New Zealand firm is our co-investor".

TMT Ventures, whose investors include Telecom New Zealand, Alcatel, Lucent and Marconi as well as financial investors, provides both capital and corporate connections that young companies need in commercialising their products.

Gavin Lonergan, TMT Associate Director, commented: "Esphion is an excellent example of how TMT Ventures operates. We were able to access key technologists within our corporate partners to help in our technical evaluation. Following the investment, we will continue to work with the company and our corporate partners to help achieve the all-important early sales and reference sites that are so critical for a young company."

The successful capital raising follows on the excellent progress that Esphion has made since its establishment. Esphion was the only private organisation to demonstrate its technology at the recent Joint Warrior Interoperability Demonstration (JWID), which involved the armed forces of the US, Australia, New Zealand, Canada and the UK.

With the continuing strong growth in data traffic and the increasing migration of telecommunication networks to an all-IP architecture, Esphion's traffic analysis and security platform provides key solutions to a global market.


** About Esphion

Esphion was established in November 2000 and employs 16 staff. The company is located at Massey University's Albany campus eCentre, which is incubator to eight companies.

Esphion's products are deployed on a core platform called nTais (Network Traffic Analysis and Interpretation System) which provides all of the computational processes that run each of the company's products.

Esphion's first product, netDeFlect, represents a major advance in network protection by combining detailed rules, signature recognition of known worms and complex statistical analysis to profile live traffic anomalies, to detect DoS attacks as they occur. netDeFlect can be deployed in three modes: Notification Mode - providing an early warning system to system administrators, Active Mode ? which implements filters to block illegitimate traffic and Controller Mode ? which provides both the early warning notification and filtering capabilities on up-stream routers. This is a major advance on competing products, most of which rely on recognising known attack signatures only and have limited ability to implement active filtering on networks. For more information, please visit:

** About TMT Ventures

TMT Ventures is a New Zealand based corporate venture programme which invests in early stage companies operating in the telecommunications, media and technology sectors of New Zealand and Australia. Managed by TMT Management, a joint venture between Auckland based Direct Capital Private Equity Limited and Boston based Advent International, investors in TMT Ventures include Telecom New Zealand, Alcatel, Lucent and Marconi. TMT Management is also a short-listed manager of the New Zealand government's Venture Investment Fund.

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