Eight Days, Three Big Funding Rounds: Storage Vendors Look To Accelerate Growth, Product Development

It has been a good eight days to be a storage vendor looking for money as three of them—Egnyte, CNEX Labs and Ctera Networks—revealed combined venture funding rounds totaling $128 million.

And while the three address different segments of the storage marketplace--Egnyte focuses on hybrid cloud storage, CNEX on high-performance SSD controllers, and Ctera on multi-cloud file services—they show that investment interest in the storage industry remains high.

[Related: The 20 Coolest Cloud Storage Vendors Of The 2018 Cloud 100]

Egnyte

Egnyte Wednesday unveiled a Series E funding round from Goldman Sachs worth $75 million, a figure that is particularly significant given that the Mountain View, Calif.-based company is profitable and has not raised capital since December 2013, said Vineet Jain, co-founder and CEO.

"Usually, if it's five years between funding a new round is either because of a recapitalization or a change in direction," Jain told CRN. "Neither here."

With the new round, total investment in Egnyte comes to $137.5 million.

Egnyte, which develops an enterprise file sync and share platform with a focus on content collaboration, has enjoyed eight quarters of growth, turned cash-flow-positive in the fourth quarter of 2016, and turned profitable in 2017, Jain said.

The company has enjoyed a 30 percent cumulative annual growth rate in the last several years, but it isn't enough, he said.

"At our June board meeting, I said we can go to 45 percent growth if we add fuel to the fire," he said.

Egnyte has over 14,000 customers, and counts among its enterprise clients such businesses as Ikea, Coach and Red Bull, Jain said. But its bread and butter is the SMB market where clients have 15 to 5,000 seats, he said. "We've been on a push to bring in as many new logos as possible," he said.

Egnyte is still primarily a direct business, although its MSP business is the fastest-growing part, said Austin Garner, vice president of the company's channel programs. MSPs accounted for 17 percent of revenue in the last quarter, Garner told CRN.

"Some of our partners are able to sell subscriptions priced under what our direct sales force does," he said. "We can go to our direct sales force and tell them they have very aggressive competition from the channel."

Egnyte's channel business would be higher if it hadn't misfired on its early channel efforts, Jain said. "We went to several large partners of NetApp and other storage vendors and offered them a perpetual license model," he said. "It was hard for them to grow. MSPs understand the model better, so the bigger growth is now coming from them."

Egnyte will be using part of the new funding to invest in product development, but the majority will go toward sales and customer satisfaction programs, Jain said.

"Increasing customer satisfaction is self-serving for us," he said. "It will lead to more sales. Customer success management will take a lot of investment to grow, but it will lead to upselling of our offerings and decreasing customer churn."

CNEX Labs

CNEX Labs Wednesday reported a new $23 million round of funding led by Dell Technologies Capital. The new round, which includes funding from Microsoft's M12 venture fund, brings total funding to about $90 million.

Dell Technologies Capital also led the company's Series A funding round, while M12 led the Series C round. Other unnamed strategic investors also participated, said Justin Heindel, vice president of marketing and business development for the San Jose, Calif.-based company.

CNEX Labs, founded in 2013, is a fabless chip designer focused on high-performance SSD controllers targeted at enterprise customers and hyper-scale data center users, Heindel told CRN. Its technology is focused exclusively on the nascent high-performance NVMe storage protocol, he said.

"Our model is to engage with SSD manufacturers," he said. "They have internal controller developments, and sometimes they engage with external controller developers. And we engage with them."

CNEX Labs also works with enterprise system OEMs and with hyper-scale data center builders looking for a performance edge, Heindel said.

"These companies are looking more and more at optimizing SSDs to control their infrastructure and their supply chains," he said. "They may bring in raw NAND flash memory combined with our controllers to make their own SSDs optimized for specific capabilities."

One SSD manufacturer developing SSDs using CNEX Labs is Taiwan-based Lite-On, Heindel said.

He declined to name other potential OEMs or partners using the technology. He also declined to name Dell or Microsoft as potential clients despite their interest in the company's technology as seen by their investment.

CNEX Labs is taking a unique approach to the SSD controller business, Heindel said.

"We're focused on hardware acceleration," he said. "Many SSD functions are normally run in firmware, but we have automated many of those functions and put them in the ASIC. The most important of these is the FTL [Flash Translation Layer], which helps manage the logical and physical layout of the data. This is a key piece of IP in the IT world."

CNEX Labs also offers ground-up designs for Open-Channel SSDs, an industry project that moves some of the intelligence to the host system, Heindel said. "This lets the SSD NAND be more software-defined to add flexibility," he said.

The new funding is posed to help bring the first generation of CNEX Labs' technology to production this year, and to help bring the second generation to production in 2020, he said.

Ctera Networks

Ctera Networks, a developer of global file services, last week unveiled a new Series D round of funding that brought the company $30 million. All of the company's existing investors participated in the new round, including strategic investor Cisco Systems, which has now invested in two rounds with the company.

Ctera Networks provides enterprise-class file systems for enterprises doing multi-cloud and software-defined storage, said Liran Eshel, CEO of the New York-based storage company.

"At the core, we provide a new file system that is software-defined and that can run on any cloud, whether it's public or private, Eshel told CRN. "Our focus is on object storage and making it highly scalable and cost- efficient. Customers can control where the data sits, in any cloud or on-premises."

Ctera Networks offers a couple of unique capabilities, Eshel said. The first is high security via encryption of the data at the source but ensuring only the client has the encryption keys, he said.

The second is accelerated data access via source-based deduplication and compression.

"Desktop PCs can serve as a cache disk or a gateway," he said. "Customers can access files in the cloud with a cache agent or can go through a gateway. This keeps the data local by storing the required portion locally. So we can replace a 200-TB NAS with a 10- to 20-TB gateway. Customers need only one-tenth the local capacity."

Ctera Networks uses a 100 percent channel model, and has partnerships with such infrastructure technology providers as IBM, Dell EMC, Hewlett Packard Enterprise and Cisco, Eshel said.

The company this year turned cash-flow-positive, he said. "But our goal is to accelerate our growth," he said. "This could be our last round, but we may need another round if there's an acquisition opportunity."