From Wired News, available online at:
http://www.wired.com/news/print/0,1294,34610,00.html

Shhhh: Hushmail Has Big Plans
by Declan McCullagh

3:00 a.m. 6.Mar.2000 PST ANGUILLA, British West Indies -- This tiny Caribbean island doesn't look like a combat zone. The tiny Sandy Ground cove suggests calm, not confrontation.

But there's a war going on over your privacy online, and the Ripples restaurant here is Ground Zero.

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It's in this beachside watering hole -- one of the few in Anguilla that posts regular business hours and actually follows them -- that you'll often find cryptographers from Hush Cmmunications trying to devise new ways to scramble, encipher, and obfuscate your email messages from any prying eyes.

The chairman and co-founder of the company, a 29-year-old programmer with a young beard and a preternatural aversion to cameras, has agreed to meet for dinner and local island beer. He doesn't want his name to appear in an article, but that's hardly unusual for a self-proclaimed privacy advocate.

Hush is one company that takes privacy seriously. It has to, since that's the way it differentiates itself from competitors.

The privately held firm launched its first product nearly a year ago, a free email service that sought to bring the armor of high-strength cryptography to anyone with a Web browser.

That's welcome news to anyone concerned with privacy violations either by meddling corporate snoops or government officials bent on increasing their police powers and surveillance ability. Since its beta debut in May 1999, Hush says its user base has grown to 150,000, aided by well-publicized security breaches at competitors like Hotmail.

It also has ambitious plans, including a forthcoming "private label" scheme in which companies will offer advertising-supported email from their domain name. Starting in April, Hush plans to provide email technology and server space in exchange for a licensing fee.

The idea is similar to what rivals like mail.com have pursued -- except, of course, that email sent between any Hushmail-powered account will be encrypted and shielded.

"What this really does is it expands the Hushmail standard," says Jon Gilliam, the Austin, Texas-based president of Hush Communications USA.

But to expand the company as well, Hush needs money. It originally was financed with some $1 million in angel funds, and hopes to raise perhaps $5-10 million in investment bank funding within the next few months. Hush also has purchased hush.com -- it already owned hushmail.com -- for "low-to-mid five figures," Gilliam said.

Other plans include PGP compatibility.

The way Hushmail works is unique, and the company says it filed in 1998 for a patent on the technology.

Users connect to the site and register the same way they would for any other email service, such as Yahoo or Hotmail. (One difference: Hushmail uses Java, which requires newer browsers but makes scrolling through email faster and more responsive.)

The connection is scrambled with SSL -- no corporate network administrator can monitor it -- and messages you send to and from other Hushmail users are automatically ncrypted with your 1,024-bit private key by your browser. The source code is available at www.hush.ai.

The main reason Hush developed its code in Anguilla is not the island's famous beaches or plentiful supply of rum punch, but its lack of regulations controlling the export of encryption products.

The tiny country has lured other crypto-programmers here too -- many live near what they call "Crypto Hill" overlooking the Ripples restaurant -- and has been the site of the Financial Cryptography conference, which Hush co-ponsored this year.

Yet it's proven difficult to run a 15-person company via email alone, and the company is planning on consolidating operations in Dublin, Ireland. Austin will still serve as its headquarters, including sales, marketing, and administrative staff, Gilliam says.

Instead of the Anguillan company being the corporate parent, Hush plans to switch it around. The plan is to have the U.S. company own the Irish company, which will in turn own the Anguillan subsidiary.

That setup will certainly help with any future IPO the company considers. But the complicated corporate structure could also serve as an international defense if the U.S. government tries to restrict encryption development or distribution.