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Diablo Technologies names new CEO, raises $19 million

Flash memory vendor Diablo Technologies named a new CEO and secured $19 million in Series C financing as the company tries to rebuild momentum for its memory technology business after fighting off legal challenges in 2015.

Chairman and CEO Mark Stibitz takes the reins from Diablo founder Riccardo Badalone, who moves into the chief product officer role. Stibitz had been an independent member of Diablo’s board of directors since February 2012. His business management and product development experience spanned start-up and public companies including Anobit, Elliptic Technologies, PMC-Sierra, Agere Systems and Lucent/AT&T-Microelectronics.

Stibitz said he started to work with Badalone on the executive transition in October. “Riccardo is the creative genius behind the innovation in the product, and he wants more time to see that through with the customers,” Stibitz said.

The $19 million Series C capital infusion raised total investments to $77.8 million since Diablo’s 2003 founding. The Ottawa-based startup commenced with $9.8 million and banked $36 million in Series A funding in November 2012 and $13 million in Series B funding in April 2015. Leading the Series C financing is ICV, a new investor, joined by Battery Ventures, BDC Capital, Celtic House, and Hasso Plattner Ventures.

Stibitz said Diablo needed money after battling legal claims from Netlist Inc., a memory module manufacturer that was its former development partner. Netlist’s accusations against Diablo included patent infringement, trade secret misappropriation, breach of contract, and incorrect inventorship.

Diablo claimed victory in March 2015 after a U.S. District Court jury found no breach of contract or misappropriation of trade secrets. The company’s law firm, McDermott Will & Emery LLP, claimed another win in December after the Patent Trial and Appeals Board decided in Diablo’s favor in three inter partes review proceedings on the intellectual property claims.

“The judge did not allow us to conduct business until we went through the legal process. We had high legal fees, and until we got through that, the company was basically put on hold,” Stibitz said. “Part of the amazing piece of the Diablo story is working through that legal process, coming out successful against the claims, clearing our good name and then [maintaining] the incredible support of the investors along the way.”

Stibitz said the Series C funding will enable Diablo to devote its full attention to its Memory1 all-flash DDR4 module and customer deployments. He said the company wants to expand its sales force, customer support team at headquarters and in the field, and research and development arm.

Target customers for Memory1 are hyperscale data center operators and major server OEMs. Stibitz said customers use the flash-based Memory1 module to increase the amount of memory in their server systems at a lower cost than DRAM.

Unlike Memory1’s use of flash as system memory, Diablo’s first product uses flash as high-performance block storage. Stibitz claimed the Memory Channel Storage product was gaining momentum until a judge ordered the company to stop selling the product last January. The judge later lifted the restrictions, but he said, “The pause was tough for us.” Diablo had sold its all-flash Memory Channel Storage through SanDisk and Lenovo under the name ULLtraDIMM.

Stibitz said Diablo faced a choice of updating its DDR3-based Memory Channel Storage product to DDR4 or focusing on the new Memory1 technology. The team chose the latter and pushed off the Memory Channel Storage refresh to this year. Diablo expects to sample the DDR4-based Memory Channel Storage product for top customers in the middle of the year and go into production by year’s end, according to Stibitz.

“We’re rebuilding the momentum the company had previously gained, but we’re doing it around flash as memory,” Stibitz said. “We felt that flash as memory was very innovative, and we wanted to get that out first in the restart process.”