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Storage startups still catching cash

Storage startups still catching cash

Procom Technology, a developer of intelligent storage technology and a pioneer in network attached storage (NAS), recently announced a new $9.75 million financing arrangement. The infusion of cash will provide Procom with operating capital of which, $5 million from this round will go towards repaying the remaining outstanding principal balance and accrued interest on the company's 6 percent convertible debenture. While that's good news for Procom, it's peanuts compared to what some storage outfits have been nabbing from venture capitalists, despite a tighter investment market.

Consider, for example, the $50 million gathered by Fremont, California-based Rhapsody Networks. Or how about the $38.3 million that Sunnyvale, California-based Sanera Systems, a developer of carrier class storage networking infrastructure products for enterprises and service providers, managed to snare.

No doubt about it, storage is still sexy. Apparently attractive enough to catch the eyes of VCs during a time when the overall VC market saw a 23 percent 3rd quarter decline in investing as reported by the PricewaterhouseCoopers and VentureOne MoneyTree survey.

According to that report, in the third quarter a total of $6.5 billion was invested in 601 financing rounds -- a 16 percent decline in rounds compared to last quarter. Currently, quarterly investment is roughly one-fourth of its Q1 2000 peak.

The survey spotted several other storage

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firms that bucked this downward trend and landed double-digit investments. They include:

Yotta Yotta, Kirkland, WA ($26 million); Panasas, Freemont, Calif. ($25.4 million) ; Scale Eight, San Francisco ($23.3 million); United Devices, Austin, Tex. ($18.2 million); Silverback Systems, Mountain View, Calif.( $15 million); Storactive, Marina del Rey, Calif. ($11.7 million); iVivity, Atlanta, Ga. ( $11 million), and; MaXXan Systems, San Jose ($10 million).

In a statement issued with the report, Tracy Lefteroff, global managing partner of the Venture Capital Practice of PricewaterhouseCoopers, noted that 1999 and 2000 were anomalous years. Despite the relative declines reported in the survey, investment totals for the year were the third highest ever recorded.

The bottom line seems to be that storage customers will still be able to bank on more choice and more innovation in the year ahead.


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

This was first published in January 2002

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