Hyper-Converged Infrastructure Deal: Nutanix Closes $140M Funding Round

Hyper-converged infrastructure technology developer Nutanix said Wednesday it closed a new round of funding it expects will more than carry it through to an IPO that could take place as soon as 2015.

The Series E round of funding, worth $140 million, brings total investment in Nutanix to about $312 million. It came from two public-market investors who have invested in the company for the long-term, said Howard Ting, senior vice president of marketing and product management at the San Jose, Calif.-based company.

Ting declined to name the investors. Reuters, however, citing an unnamed source, named them as Fidelity Investments and Wellington Management.

[Related: The Power Of One: New Converged Infrastructure Solutions]

The new investment gives Nutanix an implied valuation of about $2 billion, the company said.

Ting told CRN Nutanix closed the investment in record time.

"We went from term sheet to close in 13 days," he said, referring to the initial list of what investors want in terms of investment and valuation. "Our advisors said they never saw anything this fast before."

Ting said the new funding allows Nutanix to invest heavily in R&D and sales.

"There's just a lot of opportunity for us," he said. "This also allows us to go public on our time and in a way we choose. It allows us to go public in the way we want to."

The new funding is a sign that Nutanix is investing heavily in the future, said Jeff Guenthner, director for solutions architecture at CMI, a Mill Valley, Calif.-based solution provider and Nutanix partner.

Guenthner told CRN he is very comfortable with the way Nutanix is investing, and said the vendor is not burning through cash in the way many IT startups do.

"We're Nutanix's first partner, and talked to them when they were in stealth mode," he said. "I asked about their burn rate, and they said there was no problem. They already had their first product ready to go at the time, and still had plenty of cash on hand."

Guenthner said he expects a big part of the funding to be used to expand Nutanix's software engineering team.

"Nutanix's technology is software-focused and they need engineers," he said. "They are competing with Facebook and Google for employees and winning."

NEXT: "Insane" Business Growth, Growing Competition

Bringing technology from a startup like Nutanix can be done either as additive technology to existing IT infrastructures for things like virtual desktops or big data, or as replacements for large racks of competing converged infrastructure solutions, Guenthner said.

Nutanix seems to be succeeding, he said. "They have 1,000 customers," he said. "For a company in three years to go from zero customers to 1,000, with about $200 million in annual sales, that's insane."

While Nutanix has been growing fast, with an annualized run rate of over $200 million and sales for its last full year triple those of the year before, the company is in a market with a growing number of competitors.

In just this week alone at VMworld, rival SimpliVity unveiled an agreement to work with Cisco to provide its technology on Cisco UCS servers and VMware unveiled its EVO: RAIL solution, previously known as "Project Marvin."

In the run up to VMworld, Maxta, of Sunnyvale, Calif., unveiled a hyper-converged reference architecture, while San Diego-based Overland Storage unveiled a hyper-converged infrastructure appliance for virtual desktop infrastructures.

Nutanix recognizes that it is in a fast-growing market, both in terms of sales and number of competitors.

"This had been seen as a niche market for things like VDI (virtual desktop infrastructure)," Ting said. "But now people are running mission-critical applications including databases on hyper-converged infrastructure. IDC estimates that $50 billion is spent annually on servers and storage. We see this as our total addressable market."

Nutanix expects to see more and more competitors join the market, Ting said.

"All the awareness and marketing of solutions like VMware's EVO: RAIL is helping drive awareness in this market and is helping drive business," he said. "The market will get noisy. And resellers will have to look through the noise to find the right partners."

PUBLISHED AUG. 27, 2014