NEW YORK – Investors are pumping millions of dollars into encryption as unease about data security drives a rising need for ways to keep unwanted eyes away from personal and corporate information.
Major data breaches at Target and other retailers have made data security a boardroom issue at companies large and small. And stunning revelations of widespread snooping by U.S. intelligence agencies have also rattled companies and the public.
For venture capital, that has opened up a new area of growth in the tech business.
In February, Google Ventures led a $25.5 million round of venture funding for Atlanta-based Ionic Security, a 3-year-old company that works on encryption — the scrambling of data before it is shipped or stored.
Other encryption companies, including Toronto-based PerspecSys and San Jose, California-based CipherCloud, have announced major fundings.
The funding rush could hearken a “golden age” of encryption, as one expert puts it. But the industry also faces barriers to a tool that until recently was not a hot commodity.
Concerns about encryption range from practical challenges, such as the difficulty people have when searching for something in their encoded data, to government opposition toward privacy technology.
“People are afraid of it because they don’t understand it,” said John Kindervag, a vice president and principal analyst at Forrester Research. But he called the wider use of encryption “inevitable, because there’s no other way to solve the problem.”
Kindervag said the industry is between one and two years away from “some big revolutions” in the field. “It just needs to happen,” he added.
But Venky Ganesan, a managing director with venture capital firm Menlo Ventures, believes major advances are further off.
“Encryption slows down,” Ganesan said. “Just imagine if every room in your house was locked and you had to open and close it every time you go in. You would be frustrated.”