January 2008 / Volume 21#1 / Issue No. 240 StorageNewsletter THE INTERNATIONAL MONTHLY NEWS REPORT ON THE WORLDWIDE STORAGE INDUSTRY GEORGE TEIXEIRA, STORAGE START-UPs: DATACORE’s CEO : “WE WILL PROVIDE A FRAMEWORK INVESTORS TO INTEGRATE SAN AND NAS” TIGHT-FISTED IN 2007 StorageNewsletter: Why did you choose Florida, a From 2006 to 2007, the total number of financial tourist state with very few storage and IT compa- rounds for storage start-ups fell from 62 to 52, for a nies, rather than California, Colorado or Massa- total amount of $477 million. chusetts? Teixeira: It turns out that Florida was actually the home This figure is down 29%, since just as significantly, the to a lot of the space program. And the original founders average investment per round also dipped from $10.8 of Datacore were from the space program and the million to $9.2 million, the lowest figure since 2003, the aerospace industry. We used to work for a company year we began undertaking this yearly survey. called Systems Engineering Labs, which became VCs are still interested in storage technology, but they Encore. And we were the group that did nuclear power are looking more closely before they take out their plant control, we did telemetry for the NASA space checkbooks. On the other hand, there have never been shuttle, so what we learned was if you're doing nuclear as many IPOs (6) as there were this year. power control, you learn how to do fail-over. If you NUMBER OF STORAGE START-UPs know how to do telemetry, you know how to do high- LAUNCHED EACH YEAR SINCE 1996 speed I/O. So what we though, as a bunch of scientists 93 who wanted to use high-speed I/O and fault tolerance, where do you apply it? Storage was a natural, that's how we got into it. Now it also turned out that we were, our office in Fort Lauderdale is right next to Citrix. And 58 the reason Citrix and Datacore are there is because 55 IBM, in Boca Raton, was the founding of the PC, so 47 many of our engineers also come from the same world 37 there. 29 29 What was wrong with your company that led you to downsized and undertake an MBO? 20 13 13 What was wrong? It's very easy, we were a small com- 9 pany, and after the dot.com crisis, every small compa- 5 ny suffered, everybody in the business world wanted to 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 buy from IBM, HP, they wanted to go safe. So the (continued on page 7) (Source: StorageNewsletter) THE MOST SURPRISING HDD A RECORD 832GB 2.5-INCH FLASH HITACHI, FUJITSU AND TOSHIBA ANNOUNCEMENT FOR THE NEW YEAR: DRIVE FROM BITMICRO FOR 3Q08 TOGETHER FOR A NEW CONGLOMERATE 1.3-INCH FROM SAMSUNG x 10 x 12 IN HDDS? x 15 500GB IN A NOTEBOOK HDD, TANDBERG’S HH LTO-4 FOR 1Q08, WITH TWO PLATTERS FROM SAMSUNG QUANTUM NOW x 12 MARKET REPORTS AND THREE FROM HGST x 10 PAT CLARKE PROMOTED CEO TOP TEN IDC STORAGE IMATION KILLS ULYSSES x 11 OF TANDBERG DATA x 13 PREDICTIONS FOR 2008 x 16 EMC FIRST TO ENTER ENTERPRISE IBM VENTURING INTO STORAGE GRID HOT CZECH FLASH DRIVES WITH STEC x 11 FOR CAS WITH BYCAST x 14 DISK STORAGE MARKET x 16 INSIDE 2007 Start-ups THE FIVE START-UPS FOUNDED IN 2007 (KNOWN THUS FAR)... NAME (LOCATION) ACTIVITY AND COMMENTS Drop.io (New York, NY) Web site to store and share files online OnPATH (Marlton, NJ) switch technology purchased from Brocade created by former employees of McData Nirvanix (San Diego, CA) online storage services optimized for media affiliated with MediaMax Seval Systems (Palo Alto, CA) IBM's spinoff; new RAID architecture with two or three dimen- sional array or "cube" for video and streaming; in stealth mode Storspeed (Austin, TX) products that the increase network storage performance in stealth mode ... AND THE EIGHT FROM 2006 Adesto Technologies (Sunnyvale,CA) venture-backed fabless semiconductor company working on a new type of computer memory; in stealth mode Anobit Technologies (Herzelia, Israel) fabless semiconductor company developing novel solutions for the flash market; in stealth mode Blade Network Technologies spun-out of Nortel (Santa Clara, CA) 10Gb Ethernet switchesin blade form factor Cofio Software (San Diego, CA) VTL software for an iSCSI server Fusion-io (Salt Lake City, UT) SAN on PCI with flash memory Matrix Appliances (Marseille, France) D2D backup appliance StorMagic (Bristol, UK) backup iSCSI software and solution; also in Bloomington, MN UbiStorage (Boves, France) Ethernet backup appliance (Source: StorageNewsletter) We tallied only five new start-ups 1%, although it could change with with all these figures at their lowest founded in 2007, but the figure the emerging economies of coun- levels since 2003. Why? Well for must be taken with a grain of salt, tries such as China and India. one thing, it strikes us that in recent and could easily increase, given the France's strong performance may months, there have been fewer possibility of companies still in have something to do with the fact “hot” or “hyped” technologies in stealth mode, which do not wish to that this newsletter is published in which to invest. appear in our study - fear not, we Paris, and our start-up detecting As usual, storage software is the will find them eventually, and add skills are particularly attuned to this winner with 43% of the rounds for them to our database. market. Note, however, that apart the storage sector in 2007 (58% in So it was this time last year, when from Atempo (whether it's French is 2006), ahead of subsystems with we had only smoked out two, debatable), Arkeia and to a lesser 34% (48% in 2006). merely to find another six come extent Seanodes, and only recently, The largest amount received by a crawling out of the woodwork later these firms have hardly any interna- single start-up was $40 million for a in the year. Nevertheless, the num- tional profile. group headed by Seagate's chair- ber of storage start-ups founded man Steve Luczo, Xiotech, a former each year has been in steady decli- More Wall Street than VCs ... Seagate (big surprise!) subsidia- ne. We will probably never see the 2007 was thus a mixed bag for ry that acquired certain pieces of likes of 2000, a banner year with a storage start-ups: there was less Seagate technology just before the record 93. investment from VCs, but more deal. In 2006, the winner was Pillar IPOs. Seen in a different light, Wall with the same amount. In second 276 start-ups alive, 75% in U.S. Street has a better feeling about the place, MAID company COPAN According to our figures, there are storage industry than private inves- drummed up $32.4 million last year. currently 276 storage start-ups in tors, something that is slightly odd, 18 start-ups received $15 million operation throughout the world, since at the end of the day, much of and more, compared to 14 in 2006. and their geographic spread gives the money comes from the same The all-time record, not about to be an indication of the various levels of pockets, only via different struc- broken any time soon, is still held R&D underway in the different tures. by Cornice, a one-inch HDD manu- regions. 75% are based in the U.S., facturer that got individuals rounds hardly a surprise. Next comes Lower VC investments of $54 million in 2004 and an enor- France (with 18), Canada (12), Israel We counted 52 financial rounds for mous $97 million in 2005, which (11), the U.K. (9) and Australia (4). storage start-ups over the past year sadly did not prevent it from thro- Europe accounts for 14% of the (see table, p. 4-6) for a total of $477 wing in towel early last year. As for total, but curiously enough, Asia is million raised and an average of those still operating, and only those almost entirely absent, with only $9.2 million per financial round, for which we know total invest- 2 StorageNewsletter© January 2008, Vol. 21#1 Issue No. 240 2007 Start-ups INVESTMENTS IN STORAGE START-UPs SECTOR BREAKDOWN FOR OVER THE LAST FIVE YEARS THE 52 STORAGE START-UPS (in US$ millions) GETTING FUNDS IN 2007 No. of Total invested Average investment per Software 43% Year startups during the year firm during the year Subsystems 34% 2003 53 593 11.2 Connectivity 13% 2004 76 820 10.8 SSP 11% 2005 73 738 10.1 Storage and security 6% 2006 62 671 10.8 Fundamental technology 4% 2007 52 477 9.2 Infiniband 2% TOTAL 316 3,299 10.4 Note: Total exceeds 100% due to (Source: StorageNewsletter) certain start-ups' classification in ment, we get 153 companies in all, there have only been 16 since more than one sector (Source: StorageNewsletter) for $3.207 billion, or a total avera- 2000, and merely one for each of ging $21 million received. START-UPs ACQUIRED IN 2007 Among those start-ups still running, Total Price in those that received the greatest Company funding Buyer US$ millions amount of financing since their Archivas 28 HDS 100-120 inception continue to include Pillar Acopia 85 F5 210 ($250 million) and BlueArc ($204 Arsenal Digital 101 IBM NA million). If once again, we take into Berkeley Data Systems 1.9 EMC 76 account all the start-ups counted EqualLogic 52 Dell 1,400 and for which we know total invest- Evault 24 Seagate NA ment since the dawn of time, we FileKeeper NA Yosemite NA get an aggregate total of $7.94 bil- Illuminator 5 EMC 10 lion for 288 firms, or an average Neopath 29 Cisco NA $26.6 million for each.