Anti-spy phone firm gets major funding boost

The smartphone encryption startup Silent Circle announced a boost in funding Wednesday, grabbing $30 million in investment capital ahead of the June shipping of its signature Blackphone, which the company says can deflect cybersnooping.

The announcement came a day before the House of Representatives on Thursday approved a bill that would end mass spying by the National Security Agency (NSA). It also comes in the wake of charges against more than 100 people announced this week for unleashing a sophisticated malware that has infected half a million computers in more than 100 countries.

Silent Circle’s founder, however, warned that Blackphone still wouldn’t deter the most determined efforts of the National Security Agency to monitor mobile phones.

“It’s not an NSA-proof phone,” CEO Mike Janke told Forbes. “If you’re on the top 100 terrorists list, you’re pwned,” he added, using the Internet slang term for “defeated.”

Nonetheless, Silent Circle and its investors have bet that consumers want stronger privacy and are willing to pay for it — or for peace of mind, at least. Each Blackphone costs about 650 dollars and runs a modified version of Android software.

"Awareness of global privacy threats is irrevocably affecting individuals' and businesses' behavior and driving worldwide demand for Silent Circle's unmatched secure communication technology, calling plans and Blackphone devices,” Janke said in a statement.

Major phone makers have taken notice, with Samsung and Apple having included fingerprint-reading technologies into their latest flagship phones, billing them as a boost to security.

Silent Circle’s funding comes from two main sources: Crain Capital, a private equity firm, and Ross Perot Jr., son of onetime presidential candidate Ross Perot Sr. The younger Perot will sit on the company’s advisory board.

Silent Circle has already offered software for Android devices and iPhones that allows users to exchange encrypted text messages and make secure phone calls. But Blackphone is the company’s first attempt to build a smartphone on its own. It is partnering with other companies to come up with the phone’s physical design.

Joseph Lorenzo Hall, chief technologist with the Center for Democracy and Technology, an Internet rights advocacy group, said the Blackphone, among other things, would bar mobile phone carriers from tracking phone owners.

"If you have a traditional mobile phone on Verizon or AT&T, or whatever, they do a lot of things you might not be aware of,” said Hall. “They keep every URL and geolocation." Blackphone, as advertised, would stop this kind of snooping, added Hall.

"You would have to get the phone out of the person’s hand" to crack it, Hall said. Only a "military grade communications device" might be able to battle back determined NSA infiltration, Hall added.

Silent Circle will expand international operations into Switzerland, moving from its current base on the island of Nevis in the Caribbean. Vic Hyder, the company’s chief of revenue, cited Switzerland’s “strong privacy laws, legendary neutrality, and economic business advantages” as reasons for the move.

Hyder says the company is aiming for expected markets, like businesses that want to keep their data secure, but also for so-called prosumers, or amateurs, who buy professional grade gadgets. Businesses made up 40 percent of Silent Circle’s customers last summer, spurred on by revelations of NSA spying, according to a Forbes report.

For the average consumer, it's likely that the protections in the Blackphone will offer more privacy than the phones they have now, but Hall said that the proof will come when the company releases the devices publicly — and into the hands of reviewers. 

"As much as I like these guys and think they have awesome product, you need to have an independent evaluation," Hall said.