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Some with bucks bucking investment trend with support for storage startups

Some with bucks bucking investment trend with support for storage startups
By Alan Earls

In the second quarter of this year, equity investments into all venture-backed companies fell to $8.2 billion compared to $10.4 billion in the first quarter, according to the PriceWaterhouseCoopers MoneyTree Survey in partnership with VentureOne. According to the firms, this represents a decline of 21 percent, significantly less than the 41 percent decline experienced in the prior quarter, indicating that investment levels may be settling around historical norms.

But despite the trend, storage-related firms continued to win funding. Among such firms, venture capitalists are once again the predominant investors -- but for storage, the trend away from direct investments by existing industry players seems less pronounced. According to the survey, at the peak of venture-capital investment (the first quarter of 2000), venture investors contributed only 76 percent of the equity invested in venture-backed companies, while infusions from other funding sources ballooned. However, in most cases, the weakening economy has reduced the importance of these alternative sources. In fact, in the second quarter of this year, fully 90 percent of the equity for most venture-backed companies was supplied by professional venture-capital firms.

While outside participation from non-traditional investors such as corporations, angels and other private equity entities is at its lowest

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level in three years amongst storage investments, the "who's who" is still very much in evidence. For example:

SANrise of Dublin Ca., a provider of global managed data storage services, raised $115 million from a group of investors that included Brocade Communications Systems, Comdisco Ventures, Hitachi America, Ltd., and Sun Microsystems.

Similarly, EMC helped Storageway of Fremont, Ca., a provider of enterprise-level computer storage services, to raise $42 million.

Finally, 3Pardata, also from Fremont, nabbed a cool $100 million in early-stage funding from a group that included Mitsubishi Electronics America, Oracle, Sun Microsystems, and Veritas Software.

Other companies that earned the confidence of venture investors included the following:
Enfotrust
Halo Data Devices
InterSAN
Intrasa
Isilon Systems
SANgate Systems
Storability.

These companies shared more than $103 million, according to the survey.

According to Tracy T. Lefteroff, global managing partner of the venture capital practice of PriceWaterhouseCoopers, "Venture capital firms are standing behind their existing portfolio companies, but brand new companies with a solid business plan can still get attention and funding."

Additional Resources:
1. Is IBM negotiating to buy EMC?
This recent post in our Sound Off discussion forum, from a user who read this rumor in another source, brought some interesting responses. Follow this discussion thread and add your two cents worth:
http://searchstorage.discussions.techtarget.com/WebX?msgInContext@66.3pnEahewb8B^2@.ee83ce5/219

2. How do my peers feel about HP's recent bid for Compaq?
Storage acquisitions are all too common, but Hewlett-Packard's $25 billion bid for rival Compaq may be the biggest one yet. However, many Compaq users are not at all happy and are bracing themselves for rough times ahead. Get all the low down in this searchStorage exclusive Featured Topic.
http://searchstorage.techtarget.com/featuredTopic/0,290042,sid5_gci764787,00.html

3. What's happening in the SRM market?
Already well enthroned in the storage resource management (SRM) market, W. Quinn Associates, Inc. (WQuinn), out of Reston, Va., has been acquired for $35 million by Massachusetts-based Precise Software Solutions (Nasdaq: PRSE), a leader in application performance management. WQuinn, a privately held company, is a well-known player in storage resource and performance management solutions and currently supports the Microsoft Windows NT and Windows 2000 platforms.
Read more about the implications of this merger: http://searchstorage.techtarget.com/tip/1,289483,sid5_gci777904,00.html

4. What's the state of the storage industry and the positioning of key vendors?
Dain Rauscher Wessels (DRW), a division of Dain Rauscher Incorporated, recently unveiled a hefty 110-page overview of the networked storage market titled, "System Area Networks: The Next Generation of Scale in the Data Center." The report's authors come to some predictable conclusions as well as some that are a bit more surprising.
Click here for a summary of the report: http://searchstorage.techtarget.com/tip/1,289483,sid5_gci765454,00.html


About the author: Alan Earls is a freelance writer residing in Franklin, Ma.

This was first published in October 2001

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