Hotspot Shield

AnchorFree: A road warrior's friend, a censor's foe

March 30, 2012: 5:00 AM ET

David Gorodyansky started his security software maker to help us safely surf the Net.  But protestors like it too.

By Alex Konrad, reporter

David Gorodyansky protects users' privacy.

David Gorodyansky protects users' privacy.

FORTUNE -- David Gorodyansky, co-founder of security software company AnchorFree, based in Mountain View, Calif., says his role models in business are Bert Roberts, former CEO of MCI Communications, and Muhammad Yunus, the Nobel Peace Prize winner famed for his microcredit initiatives.

They may seem unlikely mentors for a Silicon Valley hotshot -- until you take a closer look at Gorodyansky's business and how it has evolved. AnchorFree is the maker of Hotspot Shield, an app that provides a secure Internet connection known as a virtual private network, or VPN. The company, started by Gorodyansky, 30, and pal Eugene Malobrodsky in 2005, originally targeted users who wanted a worry-free way to get online at coffee shops and other places offering Wi-Fi. (Thus the name Hotspot Shield.) Roberts, who in the 1980s and 1990s helped build MCI, now part of Verizon (VZ), offered expertise on the telecom networks that AnchorFree's software uses. Roberts also helped Gorodyansky and Malobrodsky develop their "freemium" revenue model: The company offers a free, ad-supported version of Hotspot Shield for computers; it charges $1 a month for iPhones and iPads, and an ad-free version can be had for $5 a month.

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Today Hotspot Shield is the most popular free VPN service in the world -- competitors include Ultrasurf and OpenVPN -- with more than 50 million downloads and 10 million users a month across 190 countries. But it turns out that corporate types aren't the only fans of the service, and that's where Yunus' influence comes in.

Gorodyansky says about half of Hotspot Shield's users come from nations where the governments engage in some form of online censorship. Protesters in Egypt, Libya, and other countries recently used Hotspot Shield to organize through Twitter or Facebook without governments tracking their movements. Gorodyansky, who was born in Russia and moved to Palo Alto when he was 9, says he "grew up" reading about and aspiring to follow Yunus' model of social entrepreneurship. "Strangely, life wraps itself to doing what you have in your heart," he says.

Gorodyansky remains committed to shielding his customers' identities from advertisers and governments alike. Of course there are some people who try to use Hotspot Shield to access illegal or pirated material. AnchorFree protects users from some 3.5 million "malware" and virus sites, and doesn't protect the privacy of visitors to illegal sites.

Fortunately, the company can afford to take a stand: Gorodyansky says AnchorFree is profitable and has revenue in the "tens of millions." It is a model that would make both a Nobel Peace Prize winner and a telecom executive proud.

This story is from the April 9, 2012 issue of Fortune.

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