June - 2005 issue > Feature

By Harish Revanna

“Welcome to the VC world. Don’t expect too much money. You can’t be the next IBM, EMC or Hitachi. But of course, you can build great technologies. And we’ll get you acquired. We’ve been there done that!” VCs are chanting the what-is-in-store mantras to the storage startups.

In the new millennium, storage sector alone has garnered about $6 billion in investment and VCs are raising eyebrows on how so much money went in there. Not a single startup since 2000 has reached the IPO benchmark, but still concepts like virtualization, Information Lifecycle Management, mirroring and snapshots are hot property.

And the good news—companies with such disruptive technologies will see money raining on them as their behemoth peers acquire them. However, the bad news is more interesting—no matter how disruptive your technology is, the possibility of a large funding is miniscule. Because VCs believe that currently there is no such alien technology in the horizon to replace existing storage equipments or components. Second, VCs think investments of large amount is bad practice in today’s acquisition rate-card which doesn’t match a return of investment for anything invested above $30-$50 million.

But this lurking thought among VCs is true. As Barry Eggers, General Partner at Lightspeed ventures notes, “Revolutionary ideas are most admired. But in the storage market, which has been around for a long time now, there is an averse towards revolutionary ideas. Perhaps, the customers are happy with what is already there and are reluctant to change.” This mindset of customers has made VCs averse towards capital-intensive projects. But this is not the only reason. VCs like Sunil Dhaliwal, Principal at Battery Ventures, think the crown jewel of an enterprise has still been the data.

And no CIO would like to mess with data unless they are really sure that a technology or equipment can store their data better. “So if a startup comes with a new data storage technology product then the possibility of marketing it is really grim,” says Dhaliwal. However, both Eggers and Dhaliwal believe, technologies around data storage concept could fetch entrepreneurs funding. Few such concepts are security software, replication, commodity servers’ platforms and compliance software.

If you have more query about magazine please send mail to

May 12	April 12	March 12	Feb 12