Interview with Tom Munro, Verimatrix

Story by Benjamin F. Kuo


Last week, San Diego-based Verimatrix ( raised a new round of funding from Goldman Sachs. The firm is a provider of technology to the set-top box market, particularly in the way of security and digital rights management. We spoke with Tom Munro, the firm's CEO, about what Verimatrix does, the reason for the new round, and to get Tom's insights into the dynamics of the set-top box market.

For our readers who haven't heard of Verimatrix, what is your business?

Tom Munro: We're a software company. We make software primarily used in the set-top box you find on your television set. The function of that software, is to provide security, and to prevent people from watching something without paying for that content. We're the anti-piracy and security software market leader in our particular market, which is software, versus using something like hardware or a smartcard. We provide our products to the IPTV market, the segment of the market where telephone companies are using video networks to compete with cable and satellite.

There seems like lots of providers of DRM, talk about how you fit into the market?

Tom Munro: There are certainly a lot of people, though we're not stricly DRM. We also provide conditional access, digital risk management, and watermarking in our suite of tools for content protection. We complete with companies as widely diverse as Microsoft, to folks who make smart cards, boxes, and the like.

Why do your customers use you?

Tom Munro: There are different reasons to select our solution. We're the most readily integrated solution--our software runs on the widest and largest number of set top boxes. It even runs in the PC, and we have versions running on mobile phones and portable media devices. We're also integrated with other ecosystem components--such as middleware and software for presenting user information and managing subscriber data. We're also integrated with the biggest VOD encoders and streaming devices. We've also proven the most successful in scaling our systems. We provide our products to ten of the Tier 1 telcos, where we define Tier 1 telcos as those with over 1 million broadband lines. That's the largest number of customers of any provider, including Microsoft. We have the ability to scale, have a highly reliable solution, we meet customer requirements, and the need for this environment.

Can you talk about your recent funding round, and how you decided to work with Goldman Sachs on this one?

Tom Munro: We ended up working with Goldman Sachs, because we felt they were an ideal investor. They understand the digital media space very well, and obviously they've got a great IPO capability for some future date. They've also got investments in cable TV operations in some markets, and their knowledge will help within this market. We had a number of interesting investors to choose from, and we picked Goldman on their capacity to execute and household name. As for use of proceeds, we're going to take our core technology, and extend into adjacent markets--not just set top boxes. Those are television, but also cable, satellite, mobile, and other networks.

There's been a lot of pressure on the content distribution business lately, with competition from the Internet and PCs; what's your view on how these are affecting your customers?

Tom Munro: In our view of the world, the PC is not a threat to the operator. It's something they can use to extend the reach of their network. We have a service you can buy from the cable TV company, which allow you to watch their service when you're away on the road, traveling, and just want to watch a video and catch up when you've got a broadband connection. For us, it's opening up new dimensions and a stronger relationship with our customers. Our customers are really the distributors and video service operations, and they see the requirements because of the competitive pressures. They use us to deliver content securely to mobile phones and television. It's a great market.

You mention you're also active on the mobile side of the business?

Tom Munro: We're in the early stages. We've demonstrated our software on different mobile handsets. They can converge on a single video platform, and deliver that content in the format and encryption model for mobile TV and PC. You'll see this from us in mobile operators in the not too distant future.

We hear from lots of people in the industry that the lack of standards around DRM are a big problem. What's your view?

Tom Munro: We're participating in seventeen standard bodies. There are many standards--maybe too many different standards. We're a firm believer in our customers, the digital service operators, and want themt o have the best of class in every part of the system, including DRM, that we provide. So we want open, interoperable solutions, clear APIs, and specs for how these different components need to work together. We're doing what we can to advance in this direction, but there's a lot of voices to be heard, and lots of needs to be met for people to come together.

With this funding, do you expect you'll raise any more capital in the future?

Tom Munro: This round is our Series C, and that fully funds our business plan. We don't expect to be out raising capital soon by any means.

As a Series C firm, what's your opinion on the tough IPO market. How does that affect your plans?

Tom Munro: I've been at this long enough to see the IPO window open and close before. We're not ready to go public, but it's something we think about and prepare for. If we decided to go public, we will have options. We're not too concerned that it's been a bad season for IPOs.


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