Tuesday, November 07, 2006

Bejtlich Cited in Sourcefire IPO Story

Bill Brenner published this quote in his story Sourcefire IPO could fuel Snort, users say:

The infrastructure to support Snort isn't cheap and Sourcefire isn't flush with cash, said Richard Bejtlich, founder of the Washington, D.C.-based consultancy Tao Security. "The money to keep Snort thriving has to come from somewhere, and an IPO could give Snort more legs," he said.

I based this thought on the following from Sourcefire's S-1, listed under Risks Related to Our Business:

We have incurred operating losses each year since our inception in 2001. Our net loss was approximately $10.5 million for the year ended December 31, 2004, $5.5 million for the year ended December 31, 2005 and $2.9 million for the nine months ended September 30, 2006. Our accumulated deficit as of September 30, 2006 is approximately $40.3 million.

It looks like Sourcefire's losses are narrowing, which points to future profitability. My point is that development of Snort and associated software (RNA, etc.) takes significant resources. While it might not be that difficult to fork Snort and maintain its code base, adding significant features and developing complex rules would be extremely tough for a noncommercial enterprise to sustain.

6 comments:

LonerVamp said...

Increasingly, I fear the days of free Snort also narrowing. With an IPO come a lot of stakeholders who may or may not care a whit about open source and the community, and might push Sourcefire into directions that may take a free Snort away from us, in the goal of making money. :(

Chris_B said...

lonervamp: can you point out one case where an opensource related company abandoned/forked/closed its project post IPO?

Christofer hoff said...

Richard:

You mention that SF are not "...flush with cash" yet they have $25 Million in the bank from a recent round raised a few months ago.

How does $25M on a profitable Q3 (assuming continued profitability) not equal being "flush with cash?"

Chris

Richard Bejtlich said...

Hi Chris,

When you look at an accumulated deficit of $40+ million, not yet turning a profit, and investors who expect a return, I don't think having $25 million in the bank is all that great. They're filing for an IPO to raise money (hopefully $75 million) which indicates they need it. Yes, it could be for acquisitions, etc., but the point is they need that money enough to sell more of the company to outsiders.

Guy Barry said...
This comment has been removed by a blog administrator.
Christofer hoff said...

@Richard:

Richard, an "accumulated deficit of $40M" doesn't imply that's what they owe...that means that's what they've lost. Not the same thing, right? Depends upon what they have in.

They specifically said they were profitable in Q3 which seems to me to suggest that the inflow > outflow. If that's the case and they still have $25M in the bank, methinks that's a healthy wallet, no?

I guess this is why I'm not a CFO?