VCs never shied away from the storage sector during the three-year tech downturn, and now that IT spending is picking up, they're really opening their wallets.
3PAR and Maranti Networks announced a couple of big funding rounds this week. Maranti yesterday reported $26 million in third-round funding, and not to be outdone, 3PAR followed with today's announcement of a $32 million fourth round.
These larger, later rounds could reflect a number of changes in the venture capital landscape. First, the IPO market has gotten tougher to crack, so companies must go to the VC well at later stages to carry them over to profitability.
And for VCs, investments in established start-ups reflect a more cautious approach, according to Vikram Gupta, principal of JPMorgan Partners, which led Maranti's latest funding round.
Start-ups with "super high complexity" and high capital needs may find it difficult to get funding at the development stage, Gupta told Enterprise Storage Forum. But a company like Maranti, with mature products and customer traction, represents "an attractive risk-reward ratio," according to Gupta, with additional funds largely going to sales and marketing expansion.
With IT budgets for next-generation storage products finally growing, Gupta sees an opportunity in Maranti's "very compelling differentiated architecture."
Maranti's round comes just two months after the company debuted to rave reviews. The round was led by JPMorgan Partners, with participation by prior investors Menlo Ventures, Trinity Ventures, and Alliance Ventures.
Venture funding brings with it corporate maturity, and to that end, Maranti also announced the appointment of Debbie Miller as president and CEO, a post she previously held at Egenera, 2Bridge Software, and Covia. Miller has also held senior positions at IBM, SGI, and Digital Equipment Corporation. Former CEO and co-founder Kuldeep Sandhu will become Chief Strategy Officer.
Miller says Maranti currently has five customer installations, "and a whole lot of excitement in the pipeline."
"Storage is such a pain point," Miller told ESF. "I think if you polled CIOs, they'd tell you that 50 cents of every dollar is spent on storage. It's a very competitive world, and they need to do more with less."
Maranti claims to offer the first enterprise-class network storage services controller, resulting in a scalable, highly available storage infrastructure that reduces total cost of ownership and delivers centrally managed storage services such as replication, snapshot, and mirroring from any storage device to any server in the network.
"They secured this round after they had product out at customers, which has to indicate that the customers are very positive about the solution," says Nancy Marrone-Hurley, senior analyst at Enterprise Storage Group. "VCs will not fund unless they can talk with the users. Certainly, this level of funding indicates that the VCs believe Maranti will be successful, even in this crowded market."
3PAR Nets a Bundle
3PAR made its own splash today, with a round led by Menlo Ventures, with participation from Mayfield, Worldview Technology Partners, Oracle, Sun, and VERITAS. The round was oversubscribed, and included significant participation from 3PAR's existing investors, according to the company.
"We are seeing VC money going to companies that have established themselves to the point where they are shipping product and have gained customer traction," Marrone-Hurley told ESF. "3PAR has over 20 customers and a lot of repeat business — this is the kind of traction that VCs are looking for before they invest significant amounts of money these days."
The funds will finance further expansion in the U.K., Europe, and Asia, the company says. Craig Nunes, 3PAR's senior director of product marketing, says the funds will be enough to carry the company to profitability.
"Utility Computing based on server and storage virtualization is recognized as the next wave of IT infrastructure development," Nunes says. "This wave appears to be fueling some market activity in both the venture circles as well as recent M&A activity."
3PAR boasts customers such as American International Group (AIG), American Management Systems (AMS), Hitachi ULSI, Infinity Pharmaceuticals, Matsushita, NIWS (a Nomura-IBM joint venture), Unique Solutions, VERITAS, and Merrill Lynch, and the company claims that more than half of its customers have already made repeat purchases.
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