June 25, 2007 9:00 PM PDT

Security start-up Untangle goes open-source

Untangle, a start-up that sells software for network security equipment, is making its core product open-source on Tuesday.

The company already uses a variety of open-source software projects, including the SpamAssassin spam-screening software, the Snort software that detects some network intruders and the ClamAV software that can help block "phishing" attacks that direct users to bogus Web sites. Now Untangle is adding its own framework to the mix, software that handles chores such as network management, software updates, security policy settings and processing of network traffic.

Making the software open-source will help elevate the company's profile among new customers, improve quality through better debugging, help translate the software into new languages, and attract new software modules, said Chief Executive Bob Walters.

"We feel we'll get further, faster," he said. "We are betting this company on open source."

Untangle was founded in 2003, and Walters took over in 2006. The San Mateo, Calif.-based company has 25 employees and gears its products chiefly for smaller companies with 250 or fewer employees. The company's software will be released Tuesday under version 2 of the General Public License (GPL).

The company's software was proprietary for Untangle's initial years, Walters said, but it's easier to make the case for open-source software today--not just to customers and reseller partners, but also to venture capitalists who got cold feet for a few years after the dot-com bubble popped. "Open source went through a nuclear winter," he said.

It competes chiefly with proprietary companies including SonicWall, Barracuda Networks and WatchGuard, Walters said, all of which sell hardware appliances. Untangle started with hardware devices, but now, "We're pushing further and further away from just a box," he said.

As with many open-source software companies, the company sells its software on the basis of annual support subscriptions; the average deal size is about $3,000, he said.

The company raised $10.5 million in a first investment round from CMEA Ventures and Rustic Canyon in June 2006. That funding will last into the first quarter of 2008, but Untangle expects a second round of funding for about $12 million in the fourth quarter, Walters said.

"Our model calls for that taking us to profitability in mid-2009," Walters said.

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