Dell Computer’s $1.4 billion acquisition of EqualLogic last month, which at the time was the largest all-cash M&A exit ever for a VC-backed company, is noteworthy not just for the large return, but because the deal could signal a surge of exits for storage related companies.
After all, between 2000 and 2003, venture capitalists invested more than $3.6 billion in more than 300 “database and file management” companies, according to Thomson Financial (publisher of PE Week). Many of these storage startups have since floundered. But some of these storage companies are ripe for an exit, as evidenced by the large number that have gone public in the last year.
In fact, the EqualLogic acquisition comes as more storage companies have filed for an IPO in the last 12 months than in the last five years, says Andrew Reichmann, an analyst with Forrester Research. Among the newly traded storage companies that have debuted on the public market are Commvault, Isilon Systems, Data Domain, Compellent and 3Par Data. EqualLogic was in registration for a $125 million IPO at the time the acquisition by Dell was announced.
Meanwhile, storage companies
San Jose, Calif.-based BlueArc, which provides network storage systems, has not yet set its expected share range or go on its roadshow that precedes an IPO, according to industry reports, and the company will likely not launch an IPO until 2008. BlueArc has raised about $200 million in funding over several rounds from 1999 to 2006. Investors have included
Sunnyvale, Calif.-based Omenon, which makes disk-based digital storage systems and video servers, expects to raise $115 million in its IPO, according to regulatory filings. The company has raised more than $95 million in funding from 1998 to 2007 from
M&A remains the most likely outcome for many storage startups, though the storage IPO window is definitely open now and is providing storage companies with a viable exit option, says Simon Robinson, director of storage research at The 451 Group.
Indeed, the general storage sectors are not as sexy as social networking or cleantech, both of which seemed to have dominated the investment landscape this past year. But private equity investors haven’t abandoned storage, either. In the last several months, at least six storage related companies have raised about $63 million combined in startup rounds and late stage financing deals.
• The most recent storage funding deal was earlier this month when Cleversafe Inc., a Chicago-based provider of dispersed storage software, raised a $5 million Series C round from
• Last month, ExaGrid Systems Inc. raised an additional round of VC funding from
• Also during November, Paris-based Seanodes, which develops shared storage array technology, raised $6.5 million in a second round of funding in November from
• San Diego-based storage delivery service provider Nirvanix (which launched in September) received $12 million at that time from
• In September, BiTMICRO Networks, a Fremont, Calif.-based solid state disk storage vendor, raised $9.3 million in a Series F funding from
• Diligent Technologies Corp., a Framingham, Mass.-based maker of backup and data protection offerings, raised a $10.5 million in Series D funding in August from
ExaGrid CEO Bill Andrews, whose company has shipped product for more than a year, says that the growth in data in the enterprise and with consumers has prompted investment and M&A activity throughout the storage market this past year and promises to continue in 2008.
Reichman of Forrester says that the broad storage industry will continue to attract plenty of interest from VCs in 2008 because of the exit opportunities. Despite the many storage companies that have gone public lately, he says that M&A is a likely outcome for many storage startups since it will be difficult for a point product vendor to challenge the large storage industry stalwarts.
“For many of these startup companies, getting bought is the best route to get their technology in the hands of the widest audience,” Reichman says.
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