Tech Bytes – Tid Bits in Tech News: Privacy and the Beauty of Capitalism

Philippe Bouissou knows a good idea when he sees one. As a partner at Silicon Valley’s Media Technology Ventures, Bouissou has helped to fund numerous successful software and communications start-ups. His firm currently enjoys committed capital in excess of $400 million. With the recent hubbub surrounding online privacy, Bouissou knew privacy-protecting technology would be a lucrative area in which to invest some of that capital.

In 1997, Barbara Bellissimo had an epiphany. Days after checking her daughter into the hospital, Barbara was bombarded with advertisements for medical products and services. She discovered that her insurer had been sharing information with pharmaceutical companies and other medical providers. Distressed by the experience, Barbara had an idea: A company that protected individuals’ privacy.

Legislators who think the only answer to the privacy problem is regulation should read the message loud and clear: the market is working.

With the help of co-founder Craig McLaughlin, Barbara started Privada, Inc, based in San Jose, California. After two years of brainstorming and uncertainty, Privada finally found its niche in August of 1999. Privada decided to devote its full attention to Internet security.

At first, Privada marketed directly to consumers with PrivadaWeb and Privada Messaging. PrivadaWeb boasts anonymous web surfing, while Privada Messaging provides digitally secured e-mail. The business was doing well, but new CEO Rick Jackson, took a risk on a more novel product.

On May 3rd of this year, Privada launched a revolutionary product: Privada Network 2.0, a digital privacy service for Internet Service Providers (ISPs). Privada entered into a partnership with Portal Software so as to facilitate the deployment of the network to ISPs. The idea was valuable, but the company was not. Privada needed more funding if its privacy network was to become a reality. Who would come to Privada’s aid?

ISION Internet AG, a leading German ISP, contracted for Privada Network 2.0. This announcement caught the attention of Phillippe Bouissou, who knew that if the privacy-conscious Europeans were interested in Privada, so was he. By June 5th, Privada was flush with $15 million thanks to Bouissou and Trinity Ventures.

Privada has a long way to go to prove the effectiveness and reliability of its service. Its funding breakthrough means little to American consumers and ISPs who will evaluate Privada on its merits. But the risks taken by Bellissimo, Jackson, and Bouissou may turn into a great benefit for millions of consumers concerned about privacy.

Legislators who think the only answer to the privacy problem is regulation should read the message loud and clear: the market is working. Consumer demand, technology, and capital are joining together to solve the problem. Privada is but one example of this dynamic. Government intervention at this critical stage would chill innovation and deprive consumers of the benefits of technological innovation. Given a history of misusing personal information, it is hard to understand why consumers should believe government can do anything but exacerbate the problem.