High levels of IT security spending by industry and government continue to attract venture capitalists to even the weaker entrants in the sector.

Take yesterday's $5 million second round provided to Venafi by new investor Foundation Capital and previous investors Origin Partners of Bridgewater, N.J., and UV Partners of Salt Lake City. Venafi's technology allows information technology professionals to manage encryption certificates throughout an enterprise. By automating several processes, the software enables updates that help secure information on laptops and other devices in case of theft or similar circumstances that could compromise sensitive data.

Foundation Capital's Bill Elmore believes that Venafi has found a nice niche despite some competition from Entrust and CertAlert Software. He said, "We were very cautious about pursuing the security space. Some would say that it's overfunded."

Foundation may have found a valuation too good to pass over. Venafi's valuation in this second round was lower than in its $11 million first round two years earlier while its revenue presumably has risen. And there's always that huge target market to consider.

Tags: venafi, security, foundation+capital, vc, venture capital