What? PureStorage closes yet another round!

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Waaw, just … waaw. PureStorage just closed another round of no less than $225 million. Now I am no financial analyst and I’m trying to understand startup financing bit by bit but doesn’t this seem a little odd? How much cash does a startup like Pure need to burn? It can’t be all to throw at EMC lawsuits can it?

What was the funding of other companies before they went IPO or got acquired?

  • Equallogic: $52mln – acquired by DELL at $1.4bln
  • XtremIO: $25mln – aquired by EMC at $430mln
  • FusionIO: $111mln – IPO at $1.4Bln valuation
  • NexGen: $12mln – acquired by FusionIO at $114mln in cash and $5mln in stock
  • NimbleStorage: $150mln – IPO at $1.5bln valuation, market cap today 2.4bln
  • Whiptail: $31mln – acquired by Cisco at $415mln
  • Nexsan: $25mln – acquired by Imation at $120mln
  • ScaleIO: $12mln – acquired by EMC at $200-$300mln

How far are some current startups funded?

  • Nutanix: $170mln
  • ScaleComputing: $45mln
  • SimpliVity: $100mln
  • SolidFire: $68mln
  • Nexenta: $50mln
  • Tintri: $135mln
  • Kaminario: $31mln
  • Tegile: $47mln
  • PureStorage: $475mln

What does this mean?

I have no clue but if I look at this whole list of historical facts, a funding of short to half a billion seems a stretch. They will never get that valuation out of an IPO or acquisition at the ratios of the ones that have preceded them. The only logical explanation for me is that PureStorage believes so hard in themselves that they want to be the next NetApp that makes it remaining independent in the long run, expecting to return investments through revenue.

Please feel free to educate me where I am wrong!

Disclaimer: I have done paid work for PureStorage in the past

UPDATE

  • PureStorage just released a blogpost on all the WHY questions: LINK
  • CEO Scott Dietzen gives his personal thoughts and reasoning for the long term: LINK

 

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8 comments

  1. The conclusion you have is close but that company was Nimble. Pure last talked with never mentioned NetApp specifically but had more of an idealist approach with ambishions. Long term if that is a good or bad thing is still TBD. The big iron boys have taken their time to “adopt flash”…or acquire it which left the window open for others to enter the market and get a foothold. Of the all SSD vendors, they are getting a lot more fan fair than some of their competition and the array is getting built-out feature in software over the last year or so at a lot more rapid pace than many.

    It will be interesting to see who is still out there in the next 24 months as I see there are few companies which need either grow, be bought, or end up the way of the dodo.

    1. Hi Patrick,

      I don’t think I can agree. Nimble is the most successful IPO we have seen recently. That being said I believe Nimble is ready for acquisition. I don’t know who would benefit the most from having Nimble as they all tend to play somehow in the hybrid market but from Nimbles perspective it would make sense. I have compared Nimble to EqualLogic in the past as an honest and affordable solution and it could definitely thrive further under a bigger umbrella.

      Pure has more ambition. This extra round definitely shows that. But here is the story (IMHO) the other way around; I see both HP and DELL hugely benefitting from an acquisition of PureStorage where Pure might want to try independancy. After all, how much is there left for the founders to grab at a 500mln funding in total? This valuation at 3bln is probably never going to happen. I fear that Pure is at the point where FusionIO was a few years back: too small to win, too big and too expensive to get acquired. Burning that cash and carving market share is probably the only way forward in the near future.

    2. I forgot to answer your last point towards all the other all flash startups and the fact that PureStorage gets more flair. To grow an independent company you need more than a great product. You also need a great company build with (a lot of) great people. To grow a company to its size that it can be disruptive enough in the long run, you’ll either need a quick cash flow positive (ex Veeam) or you need cash to burn. PureStorage just got $225mln extra cash to burn to grow it’s sales and marketing force while still not being cash flow positive. This is today their biggest advantage of all other all-flash vendors that have not been acquired yet. Next to that they appear to have a great product as well 🙂

    1. Thanx for adding that one, must have missed it. Added to the list. I could have added the humongous acquisition of Isilon for $2.25bln in cash but I found no pre-acquisition funding numbers which was the reason of this post.

    1. This is very much of a ‘it depends’ answer. First of all – and this comes from a bigger discussion wth Stephen Foskett – there is a big chance that there is no such thing as an all-flash-market. The question is more of an all-purpose storage market or a dedicated workload market. In the all-purpose market PureStorage lines up against ANY mid-tier array, including all Hybrids like Tintri, Nimble and Tegile.

      Architecturally there is a fundamental difference between designing a storage system for flash optimization or disk optimization. In this case both solutions do apply. Tegile (Tintri and the likes) just choose disks as their second ‘tier’, whereas Pure has chosen another type of Flash as a second Tier (staged writing from SLC to MLC).

      Did I give an answer to your question? NO. Why, because there is no stacking Tegile against Pure if you do not have a specific case and/or you do not include everyone else in the market. I hope I did at least open your options instead of narrowing them down.

      Note: are you as customer/reseller or do you work for a storage vendor?

      1. I’m looking at both companies for a solution. The workload is mostly VMware environment.
        The hybrid architecture is attractive because it lowers the cost per gig while effectively achieving very high performance. Tegile claims that while they offer all-flash arrays, their hybrid system will typically provide the same performance due to the fact that the entire active workload is on SSD/DRAM while the inactive data is moved to spindles. They also claim to get the same data reduction rate with dedupe/compression as Pure.
        A big differentiator is that Tegile offers multi-protocol access (Block and File). I think Pure is a little more sexy and bit more friendly to use, but they are soo expensive.

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