What General Catalyst VC Steve Herrod Is Investing In

VIDEO: Steve Herrod, managing partner at General Catalyst, discusses how his venture capital firm invests in security and where it's placing its big bets.

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There is no shortage of venture capital funds flowing into security startups lately, with one of the leading players being General Catalyst Partners. Helping to lead General Catalyst's efforts is Managing Partner Steve Herrod, who is well-known in the IT industry from his tenure at VMware, where he was CTO and senior vice president of R&D.

In a video interview with eWEEK, Herrod discusses some of the mechanics of how he looks to find the next big thing to invest in. General Catalyst has approximately $3 billion in funds under management across multiple sectors.

General Catalyst invests in the early stages of the venture capital process for new companies, which brings with it some risk. Unfortunately, most early stage companies don't survive, Herrod said, which is why investors need trusted resources, like the ones at General Catalyst, to make the right investment bets.

"You need to be in the ones that really make it very large to cover for the ones that don't," Herrod said. "So it's definitely a high-risk, high-reward market, and the bet is that you have people that either understand something about the market or can attract the companies that are most likely so succeed."

Looking at trends in security, Herrod said he sees a gap in the perimeter-based security model, which is no longer effective. That's one of the reasons why he has invested in Illumio, which to date has raised $142 million in total funding.

"Partly due to VMware, Docker and all the types of new deployment models, things now move faster," Herrod said. As such, traditional mechanisms, where one IP address is locked to another for security, don't scale to meet modern deployment challenges, he added.

Herrod isn't limiting his investments to software, saying he's not afraid to invest in hardware as well.

Herrod has also invested in ThreatStream, which has raised $26.4 million in total funding to date. "ThreatStream has created very trusted communities and mechanisms for anonymizing information and managing social groups to encourage sharing," he said. "The reason that matters most is, sure you can get public information about stuff that is happening, but if someone is breaking into a bank that is like mine, that information is far more valuable."

The big challenge for Herrod as he looks for companies to invest in is being able to sort through all the activity and information to find the next big thing.

"There is a lot of noise around what's hot," he said. "Seeing through all the noise and choosing the really great companies is what I have to do every single day."

Watch the full video with Steve Herrod below:

Sean Michael Kerner is a senior editor at eWEEK and InternetNews.com. Follow him on Twitter @TechJournalist.

Sean Michael Kerner

Sean Michael Kerner

Sean Michael Kerner is an Internet consultant, strategist, and contributor to several leading IT business web sites.