Counterpane Bought: Investors Relax

Eighteen months after MCI bought MSSP NetSec, another telecom has bought another MSSP. This time, BT bought Counterpane. I guessed that Counterpane was desperate. At least the investors who poured four rounds of venture capital into Counterpane can realize some sort of return. The announcement concluded with this statement:

As at 31 December 2004 the audited gross assets of the business were $6.8m.

That doesn't sound very promising.

I expect a good amount of reorganization and removal of personnel. BT will want the low-level analysts to stay, but some will probably leave. The middle-managers will want to stay, but BT will send them packing. Since Counterpane's brain trust has largely disappeared, they only need to keep Bruce Schneier as their "visibility guy" or "mantlepiece."

Good luck to them -- I imagine they will be morphed into protecting BT's cloud.

Update: After reading helpful comments and stories like this, it appears Counterpane's investors took a big loss if the company sold for around $40 million. According to the Counterpane series C VC funding press release:

The Goldman Sachs Group, Inc., and Morgan Stanley Dean Witter Private Equity, who all invested further in this round, bringing the total capital raised by Counterpane to $58 million.

Then add $20 million of series D VC funding and the total is $78 million. It looks like the "return on investment" I mentioned earlier was very negative.

Finally:

Counterpane will run as a standalone operation until April 2007, before being integrated in to BT's Professional Services organisation.