ExtraHop Hauls In $5.1M to Help Companies Manage Their Networks Efficiently

And the hits keep coming. In a busy week for financing deals, Seattle-based ExtraHop Networks is announcing today it has raised a $5.1 million Series A round, led by Madrona Venture Group. Prominent angel investors Marc Andreessen and Ben Horowitz also participated in the funding round, which closed at the end of February.

ExtraHop, which jumped out of stealth mode in December, makes software to help corporate information-technology organizations monitor their applications environments and network transactions. The overall effect is to let both network operations teams and applications teams troubleshoot IT problems. That’s unusual, as most available tools are targeted to one group or the other. “It’s like Google Earth for networks. It’s a great tool for reactively exploring what might have caused specific problems,” says Jesse Rothstein, ExtraHop’s co-founder and CEO.

He means you can see IT problems from a high level, and zoom in and out to investigate possible causes. Rothstein is a hardcore techie, a veteran senior architect from Seattle’s F5 Networks, so he throws around terms like TCP alerts, packet sniffers, and seven-layer networking models as if they were items on a grocery list. Helen Tang, ExtraHop’s vice president of marketing, gives some real-world context when she points out that a networking problem might be that your chief financial officer can’t send an e-mail because too many computing resources are being directed to your company’s firewall at the same time. “The network is so mission-critical to any business these days,” she says.

If there’s a common theme to software companies we’re hearing a lot about these days, it’s the ability to help businesses manage their IT costs and do more with less. Some local examples of this broader trend would be Apptio (IT optimization), Skytap (virtual machines), and Symform (data storage). “One message that resonates in the current economic climate is to help understaffed teams work efficiently,” Rothstein says. “We help organizations make their existing IT systems and infrastructure work fast and reliably.”

Rothstein and fellow F5 veteran Raja Mukerji founded ExtraHop in January 2007. They landed seed funding from Madrona and other private investors in November 2007, and began selling their product last December. Rothstein says the company has about 20 people who contribute to day-to-day operations, counting full-time employees and contractors. The latest financing is “very significant because it gives us the necessary capital for sales, marketing, and product development,” he says. Indeed, ExtraHop is “aggressively hiring for five open positions” across sales, product development, and other areas, says Tang. The company has gotten “great customer traction, better than expected,” and is planning to roll out two more products this year.

As for its investors, Rothstein says of Madrona, “I’m a huge fan of having a local VC for the first round. Having them close, they can help with everything from sourcing talent to finding office space.” And while they are not local to the area, Andreessen, the co-founder of Netscape, Opsware, and Ning, and Horowitz, the former CEO of Opsware and senior vice president at Hewlett Packard, are no slouches themselves. Rothstein calls them “both extremely knowledgeable” and cites their “excellent domain knowledge in data centers and enterprise.”

But surely other companies have come up with solutions to the complex IT problems that increasingly come with distributed data centers, widespread adoption of virtual machines, and intelligent network devices? Yes, but ExtraHop’s advantage, according to Tang, is threefold: its software can be used by anyone in the company (not just the networking experts), it can keep up with the traffic speed on any network, and it’s simple and easy to deploy.

Rothstein adds that recent gains in processing power and storage capacity are what make ExtraHop’s approach possible at all. “Two or three years ago, it would have been infeasible,” he explains. “We really see ourselves as innovators.” So while the company competes with a hodgepodge of traditional network-management technologies (that’s where packet sniffers come into play), most big companies like Cisco and F5 don’t really compete in the same space. However, Westford, MA-based NetScout (NASDAQ: NTCT) and a few other network-performance management companies around the country do—and it will be interesting to see whether ExtraHop’s technology and market strategy give it that extra spring to stay ahead of the curve.

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