ConSentry Networks said Friday it raised $20 million in its fourth round of funding, showing a hearty investor appetite for startups working on network security despite rising competition in the sector.

The company said the latest round included three existing investors: Accel Partners, INVESCO Private Capital, and Sequoia Capital. They were joined by Duff Ackerman & Goodrich (DAG) Ventures. ConSentry’s total funding now stands at $51 million.

ConSentry was formed in August 2003, and has about 100 employees. The Milpitas, California-based firm has about 50 customers and hopes to double that by the year end, said CEO Tom Barsi.

Its hardware product helps businesses protect their networks by inspecting every data packet on their local area network without slowing them down. It also ensures all users and devices on the network comply with security policies through what is called network access control.

The current round of investment will be used to strengthen the sales and marketing teams worldwide, and open new offices in Asia and Europe.

“The market is crystallizing, and there is a clear need to authenticate users on the network,” said Mr. Barsi. “This is the first major shift in the networking switch business in a decade.”

Riding the NAC Wave

Network access control (NAC) has become the buzzword of the year. IDC estimates the endpoint security market, which includes NAC, to grow to $6.2 billion by 2009 from $4.4 billion in 2005.

The rise in mobile workers, employees, and contractors who use laptops and handheld devices to log on to corporate networks has made some companies have the networks as the focal point for their security needs.

“For many of our customers, NAC is the No. 1 priority this year,” said Mr. Barsi. “It is about really locking down your network and figuring out who gets admission to it.”

Over the last two years, the NAC segment has seen a number of new players. In March, Seattle-based Lockdown Networks said it has raised $3.1 million from investors including Intel Capital, the venture arm of Intel, to better integrate Intel’s chip-level network access technology into its switch (see Intel Puts $3.1M in Lockdown).

Competitors also include Nevis Networks and malware-prevention companies like Vernier Networks and Mirage Networks.

“What separates us is we set out in this market with the vision of secure switching,” said Mr. Barsi. “We are the only company from a startup perspective that built our solution from the ground up.”

Rising to the Top

ConSentry also faces competition from some firmly entrenched players. Networking giant Cisco has been marketing and pushing for NAC for a few years. And convincing customers to buy switches and routers from ConSentry instead of Cisco won’t be easy, said Dave Passmore, research director with the Burton Group.

“Part of the reason why large enterprises are comfortable with Cisco is because they know Cisco is going to be around,” Mr. Passmore said. “There’s that risk when you buy from startups.”

Still, ConSentry’s investors believe it has an edge over Cisco. “Cisco has been just talking about NAC as an idea for some time,” said Esfandiar Lohrasbpour, a general partner at INVESCO private capital, which invested in ConSentry’s second round and has also backed companies like Arcot Systems and VeriSign. “But ConSentry has been the first to get to it.”

So far, ConSentry has preferred to peddle its products as complementary to Cisco gear. “You have to innovate around Cisco,” said Mr. Barsi. “So we delivered an overlay appliance that is non-disruptive; it can work with Cisco switches out there.”

Second Fiddle

ConSentry may have found a niche but the company is not likely to be content playing second fiddle to Cisco for long. In August, the company plans to introduce a switch that will include the network security features.

The move would put it in direct competition with Cisco’s switches but ConSentry is confident it can find customers. “We will go after folks who buy anything but Cisco and there are plenty of folks like that out there,” said Mr. Barsi.

ConSentry’s VCs certainly are confident that it can emerge at the top of the pack. “These guys have momentum,” said Mr. Lohrasbpour. “They have a strong product, customers, revenue, and presence.”

Contact the writer: PGanapati@RedHerring.com