Reflecting on a Successful Exit – Fidelis Security Systems

I’d like to take a moment to congratulate Peter George and the entire management team at Fidelis Security Systems. The Company’s recent acquisition by General Dynamics is clear validation of Fidelis’ essential role in helping secure and monitor critical data for major business and government customers. Ascent is very appreciative of your efforts and thrilled with the outcome.

In the aftermath of the Fidelis exit, I have been reflecting upon our involvement with Fidelis. In 2004, we had identified the opportunity for securing outgoing data transmissions from the “inside threat” as a compelling emerging market. (Subsequently this market commonly became known as the Data Loss Prevention or “DLP” market.) Through our own proactive research efforts and network referrals, we identified Fidelis as an intriguing player. Matt Fates and I first visited the Company in the week between Christmas and New Year’s in 2004. While the Company was in the early stages of development, we noted the strong progress they had made to that point on a self-funded basis, as well as the strength of the team’s technical vision. We co-led the Series A financing with Tim Webb from Inflection Point Ventures.

We correctly anticipated an intensive process post-financing to position Fidelis for success in a highly competitive market involving frequent trips to Fidelis’ Bethesda, MD office. While we certainly went through the typical highs and lows of navigating through the early stages of development, the team was committed to success and remarkably prescient in their assessment of how the data loss prevention market would develop. Over the years the team evolved, especially with Peter George joining as CEO coincident with Tudor Ventures leading a Series B Financing in 2008. Peter had tremendous leadership skills along with extensive entrepreneurial experience in the IT security market. We were thrilled to have Peter leading Fidelis through the Company’s next phase of development.

As is often the case, the Fidelis team did not rigidly adhere to the initial business plan, but needed to execute a critical strategic pivot to ensure success. The DLP market had evolved and consolidated with several first-generation participants exiting by acquisitions to incumbent vendors in the 2006-2010 timeframe. While many of the early players effectively addressed the compliance aspects of DLP for preventing against accidental or unsophisticated data dissemination, most solutions were unsuited for the challenges of protecting against Advanced Persistent Threats (“APTs”), meaning sophisticated attacks, often by nation-state sponsored hacking teams, designed to bypass perimeter defense systems and extract critical data on a stealth basis. Gene Savchuk, Fidelis’ brilliant Co-Founder & CTO, worked in conjunction with Fidelis’ commercial team to architect a new solution that would leverage Fidelis’ unique Deep Session Inspection capabilities to address these requirements. From the 2010 to 2012 timeframe, the Fidelis team successfully navigated this transition and earned recognition by customers and market analysts as one of the emerging thought leaders in this critical cybersecurity market. This translated into commercial success and served to increase strategic interest in the Company.

Despite the changes within the venture industry through Ascent’s 25+ year history, our essential investment model has remained consistent: back companies that have talented management teams, unique products or services, and that address rapidly growing enterprise IT markets. All these characteristics existed within Fidelis. We also were fortunate to have a team and board that could adapt to the evolving market conditions. Best wishes to the Fidelis team for continued success post-acquisition. We look forward to working with the team and our co-investors (Tudor, Point Judith, and Inflection Point) in subsequent ventures in the future.