Solid Exits, Solid State Have Storage Valuations Rising
September 10, 2012
(c) 2012 Dow Jones & Company, Inc.
Reliable exits and the shift towards solid-state storage are sending storage valuations to new highs. Nimble Storage Inc . is no exception.
The San Jose-based company just raised $40.7 million in new funding, giving the company a valuation that is in the "same zone" as the valuations the last generation of storage start-ups, like Data Domain Inc., Isilon Systems Inc. and 3PAR Inc ., had when they went public, said Suresh Vasudevan , its chief executive. Those three companies went public with valuations around $800 million.
Accel Partners and Sequoia Capital, which also provided Nimble with its Series A round, led the new funding. Lightspeed Venture Partners and Artis Capital Management also participated alongside new investors GGV Capital .
The most recent funding is considered a mezzanine round. The company last raised financing in a $25 million Series D round in July 2011 from Accel , Artis Capital, Lightspeed and Sequoia. It has now raised just over $98 million.
This spring, Violin Memory Inc . raised $50 million at a valuation over $800 million. Last month Nutanix Inc . raised $33 million with "very little dilution," its CEO previously told VentureWire. And XtremIO Ltd., a company that was yet to launch its product, was bought by EMC Corp . for $430 million in May.
Like Nimble Storage, those companies are all part of a group of emerging storage companies that are incorporating the use of flash memory into their products to boost performance.
"As far back as I can remember, storage valuations are at an all-time high," said Rick Grinnell, a partner with Fairhaven Capital Partners and long-time investor in storage.
It used to take a storage company a few years of shipping products to get a $200 million to $300 million valuation, but now companies are getting that after a quarter or two; growth-stage companies are getting $500 million and up, Mr. Grinnell said.
Nimble Storage falls into the growth-stage category, and not just in terms of its valuation. It has been selling its gear for two years, lining up over 600 customers, and the pace is accelerating, Mr. Vasudevan said. About half that number came in the last two quarters and it has seen its sales grow three times in that period from the same time last year, he said.
There's a lot of excitement from investors around the storage sector right now. Flash memory is rapidly establishing itself as a permanent part of the storage space and there have been several exits of $1 billion or more in storage in the last few years.
Nimble Storage builds storage equipment that combines flash memory and hard-disk drives into a single appliance that provides the performance for primary storage and the capacity for back-up.
In addition to its technology, Nimble Storage is getting a boost from several outside trends. Virtualization is creating a demand for storage that can accommodate random input/output performance and a recent wave of consolidation in storage has sent resellers scrambling for new products to bring to their customers.
Though the valuation may be a big number, its investors are confident that there's enough room for growth to get a venture-sized return from the current round, said Ping Li , who represents Accel Partners on Nimble Storage's board.
Nimble Storage will use the proceeds of the round to continue hiring, especially in sales, engineering and support. It grew employee headcount sixfold to 240 in the last 18 months and will likely double that number over the next 18. It will also continue to expand into Europe and begin to sell into Asia, starting with its recently opened Australia office, Mr. Vasudevan said.
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