Cisco to Buy Observable Networks Cybersecurity Startup

Because the traditional approach of scanning data for malware has become less effective given the widespread use of encryption, Observable’s software enhances security by monitoring all devices attached to a network.

by David Nicklaus, St. Louis Post-Dispatch / July 25, 2017

(TNS) -- Back in 2011, Patrick Crowley realized that the spread of encryption and cloud computing created big problems for traditional cybersecurity setups.

The way Crowley, a Washington University professor of computer science and engineering, solved those problems will soon cause networking giant Cisco Systems to have a development team in the St. Louis area. Cisco agreed this month to buy Observable Networks, the firm Crowley founded to pursue his cybersecurity ideas.

The deal should help put St. Louis, which has already received favorable national press for its tech-startup scene, on the map for entrepreneurs, venture capitalists and technology workers. It also may boost the national profile of Arch Grants, the St. Louis nonprofit group that handed Observable $50,000 just because the company looked promising.

The purchase price wasn’t disclosed, but Crowley and Bryan Doerr, Observable’s chief executive, said keeping Observable’s 14-person team, of whom 11 are based in St. Louis, was an important part of discussions.

“Cisco was excited to have the whole company come on board and keep on doing what we were doing,” Crowley said. “We will be able to do that with far greater resources now.”

What Observable’s software does is to enhance security by monitoring all devices attached to a network. The traditional approach of scanning data for malware had become less effective, Crowley explained, as the use of encryption spread.

Observable uses an approach called end-point modeling, which creates a profile of each device and detects when it’s behaving unusually. It would raise an alarm, for instance, if someone tried to download sensitive files on a laptop.

Crowley founded Observable in 2011 with an investment from Peter Finley, co-founder of Clayton private equity firm Thompson Street Capital Partners. Winning the $50,000 in 2012 was an important early break; Doerr, who previously was chief technology officer at Savvis, said the Arch Grants recognition helped persuade him to join the company in 2013.

After that, things happened fast. Observable raised $2.45 million from investors in 2014 and hired salespeople to launch its product commercially. In 2015, Amazon Web Services began offering a data feed that made Observable’s variety of modeling easier, so the company concentrated its marketing efforts on companies using the public cloud.

“We had to be thoughtful on where to deploy our limited resources, and this was our big opportunity,” Doerr recalls. “We were growing in traditional markets, but we noticed that when we were winning in the cloud, we were growing a lot faster.”

That growth caught the attention of Cisco, which is making a big push in cybersecurity. The Silicon Valley powerhouse decided that it wanted both Observable’s software and its team of developers.

The purchase is a win for St. Louis, too. “To bring Cisco to St. Louis is a huge accomplishment, something really meaningful for our region,” says Emily Lohse-Busch, executive director of Arch Grants. “Not only for our startup community but for other people who are looking to come here, this is a huge stamp of approval.

Observable’s venture capital investors were from New York, but Crowley and Doerr say they didn’t feel any pressure to move the company. “It’s been a very good area for us to build a company,” Doerr said. “We were very pleased with the ready availability of talent here.”

Now Cisco, a $48 billion company with 71,000 employees around the world, will get a close look at the local talent pool. If it likes what it sees, cybersecurity may become a major growth sector here.

©2017 the St. Louis Post-Dispatch Distributed by Tribune Content Agency, LLC.