Corrections or additions?

This article by Kathleen McGinn Spring was prepared for the

April 11, 2001 edition of U.S. 1 Newspaper. All rights reserved.

SafeStone: Security Software for a Wired World

SafeStone Technologies is launching its U.S.

headquarters

from the last suite of offices in the most recent office building

to be completed along the Route 1 corridor. Purple mouse pads,

comfortable-looking

desk chairs upholstered in purple, and even miniature purple plastic

waste baskets with swing tops sit ready as the U.K.-based start-up

searches for staff to fill its new workstations.

The company, which recently banked nearly $12 million in venture

capital

funding, is marketing computer security software to big companies.

It has a number of offices in Europe, but plans to derive the lion’s

share of its revenue from U.S. sales. It just moved from shared space

in the Princeton Office Gallery in Forrestal Village to 3,400 square

feet in 600 Alexander Park, a building so new its elevators still

smell of new carpet. Now housing just three employees, the new office

is fitted out for 15.

SafeStone was founded last year by John Todd, who serves as the

company’s

CEO. Todd helped build SmartForce (Nasdaq: SMTF), a company that

provides

online instruction to information technology professionals, and took

it public in 1995. He left that company in 1998, and non-compete

agreements

forced him out onto the golf course, where, he says, "I was

bored."

So he retained PricewaterhouseCoopers to help him find a prospect

to develop into a new company. "Where are the hottest

sectors?"

is what he wanted to know. The first company PricewaterhouseCoopers

turned up was CCT, a U.K.-based company with a suite of Internet

security

products named DetectIt. This watchdog software is designed to allow

a company’s employees easy access to computer functions and databases

they are allowed to use, during hours they are allowed to use them,

while keeping employees — and hackers of all sorts — away

from data they are not authorized to access.

CCT had great products, Todd says, but was not capitalizing on them.

It had, in his words, a "stealth" marketing strategy. He

bought

CCT UK and its Wisconsin-based U.S. distribution arm, which he

describes

as "one man and a dog." His plan is to use — and expand

— CCT’s technology and to build a company around it. Toward that

end, SafeStone, the company he created to buy CCT, took in $11.75

million in Series A funding in December. Investors include 3i, meVC

Draper Fisher Jurvetson Fund I, and Cross Atlantic.

CCT had a few clients and about $1 million a year in sales when

SafeStone

bought the company. SafeStone added clients and racked up sales of

$2 million from June of last year, when it bought the company, through

December. Clients include Johnson & Johnson, IBM Global, Fidelity,

and Credit Lyonnaise.

SafeStone software runs on a number of platforms,

including

Windows NT, UNIX, and Linux systems. It provides and manages IT

security

for companies by, among other things, regulating which employees,

vendors, or clients can access which programs or sets of data, from

where they can access them, and at what times of day. It monitors

vulnerability, a rising concern as even the IRS recently admitted

to breaches involving taxpayers’ electronic returns. In addition to

limiting access to sensitive information, its software can generate

reports letting companies know how many times users try to get into

unauthorized files, and from what locations.

The software is marketed on a perpetual lease on a per machine basis

with the company charging additional maintenance fees for technical

support and upgrades. Todd says the amount of the average sale is

$50,000, and ranges up to $1 million. New technology, which would

provide security applications from all of a company’s platforms, no

matter how diverse, is in the works. The average price for that

technology,

Todd says, will be $150,000 to $200,000.

Paul D’Alessio, SafeStone’s regional director of vertical markets,

says a promising market for the company’s security software exists

among insurance companies, HMOs, hospitals, and other healthcare

companies

that need to comply with a security provisions of the 1996 Health

Insurance Portability Act (HIPPA). Included in that act are mandates

that require anyone who stores or transmits patient records

electronically

to comply with 19 separate health information security policies. The

regulations become law on April 16, and companies have until April

2002 to put a system in place. "This is a relatively short

window,"

D’Alessio says, and an opportunity for his company.

Initially SafeStone is targeting the world’s 1,000 largest companies,

Todd says, and is relying on direct sales personnel like D’Alessio

to make big sales. The company has sales offices in the U.K., Belgium,

France, and Germany, and in a number of U.S. cities, including Boston,

Philadelphia, San Francisco, Houston, Chicago, New York, and Atlanta.

Most of them are virtual offices, but the company, which says it plans

to add many more offices, has plans to add support personnel. In the

near future, telemarketers — the intended users for many of those

violet mouse pads — will reach out to what Todd terms "second

tier" companies.

Todd is the son and grandson of entrepreneurs. His grandfather owned

two opticians’ shops, and his father expanded that business to 16

outlets. Todd lives outside London with his wife and two children,

ages 7 1/2 and 9 1/2. A 1983 graduate of Wolverhampton University

in the north of England, Todd majored in biology. "I’m a plant

man," the tall, thin Brit says with a broad smile. His first

answer

to the question of how a biology major happens to be launching a

global

software company is "lady luck."

"The actual fact," he says, "is that North England was

having a terrible recession when I graduated." He moved to London

to find work and "drifted into sales." His first job with

was with a company selling accounting software for PCs. After a couple

of more sales jobs he ended up at CBT Systems, a company that became

SmartForce.

Marnie Threapleton, vice president of sales and marketing, is in

charge

of SafeStone’s Princeton office and its U.S. operations. She is now

looking for telemarketers, and also for marketing, business

development,

operations, and finance personnel.

Threapleton worked with Todd at CBT. When he found his new business

niche, he called her. "Right, I’m ready to push the button,"

is how he announced the venture. Threapleton worked on the start-up

in London until Todd asked, "Do you fancy going to the U.S?"

That was 18 months ago, and Threapleton did not hesitate. "I’ve

always wanted to work in the U.S.," she says. "It was the

realization of one of my ambitions."

Working from shared space in Forrestal Village, Threapleton prepared

to launch the U.S. headquarters. The company expects some 70 percent

to its revenue to come from the U.S. Princeton was chosen as a base,

she says, because it is a relatively short hop from London, it is

halfway between New York and Philadelphia, and its time zone makes

communicating with Europe easier than it would be in the middle of

the country or on the West Coast. Besides, she says, "It’s lovely.

And very safe."

Threapleton’s sister, Amber, came over for three months to prepare

the new offices. Already proclaiming New York her favorite city,

Threapleton

took her sister in to the city to celebrate her 30th birthday. The

pair got facials at Elizabeth Arden, went to Central Park, had

cocktails

at the Four Seasons, and dinner at the Chelsea Bar and Grill.

Building a U.S. operation for SafeStone doesn’t leave a lot of time

for wandering the streets of New York, however. Threapleton, in charge

of the company’s far flung U.S. sales force for now, earned 65,000

domestic frequent flier miles last year. "Last week I was in Los

Angeles, next week Boston," she says. The company will add

management

layers, she says, and would prefer that positions such as sales

manager

be filled from within, providing an incentive for employees. All

employees

are stakeholders, adding another performance incentive, and the

company

throws in extras, too. In February, Threapleton says, SafeStone took

all of its sales and tech support people on a trip to Barcelona.

At the age of 18, after she graduated from grammar school in England,

Threapleton competed with 10,000 applicants for 100 places in retailer

Marks and Spencer’s management training program. Accepted, she soon

found herself managing stores in a "work hard environment"

that she says provided excellent training in organization skills and

customer service.

Threapleton’s father was a senior banker with HSBC and is now retired.

Her mother was "entrepreneurial and managed four children as

well."

After running a number of retail stores, her mother has taken a job

as training manager for the U.K. fire service.

Threapleton’s husband is head of process for Captiva Software, a

company

that, ironically, has its head office in San Diego. Just as she is

setting up a U.S. operation for a U.K.-based company, he is setting

up a U.K. operation for a U.S.-based company. This means, of course,

that the two do not see much of one another. Threapleton says both

she and her husband of three years are fine with the arrangement.

"It really focuses you on what’s important in a relationship,"

she says. "You think you’re a good communicator, but this really

forces you to communicate."

The couple E-mail back and forth all the time. "E-mail, voice

mail, instant messaging, we have it all," she says with a laugh.

"Now we’re thinking of getting into video conferencing."

When they do get together — each takes a turn flying across the

Atlantic every other month — "we have so much to talk

about,"

she says. "And we don’t have the day-to-day distractions."

She says their bi-continental relationship will most likely be fairly

long term, because each of their companies will need them to pilot

growth for at least four more years.

As for SafeStone’s future, Todd expects to go for another round of

financing within the year, and to take the company public in about

36 months. Growth will be organic for a year, but after that time,

he says, the company may make acquisitions. Growth in the security

software industry has been running at 68 percent a year, and Todd

doesn’t expect a recession, should there be one, to slow that down

much. The company’s main competitor is PentaSafe, a three-year-old

company with headquarters in Houston.

The security software marketplace is "still very fragmented,"

Todd says. But he sees an explosion of demand in this niche industry.

There are a handful of software companies that dominate their niches,

he says, declaring "I want to be one of them."

— Kathleen McGinn Spring

SafeStone Technologies Inc., 600 Alexander Park,

Suite 303, Princeton 08540. Marnie Threapleton, vice president.

609-750-8502;

fax, 609-750-8655. Www.safestone.com


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