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Investors pour $94 million into Cloudian storage

The record $94 million funding round that Cloudian trumpeted today suggests investors have plenty of interest in highly scalable object storage and distributed file systems.

Cloudian sells turnkey HyperStore object storage and HyperFile NAS appliances. Customers also can install Cloudian storage software on industry-standard servers.

The San Mateo, California-based startup’s fifth round of financing exceeded all prior rounds combined and lifted its overall today to $173 million since Cloudian storage launched in late 2011.

The latest Series E round isn’t all money. It included a previously announced $25 million contribution from Digital Alpha, a private equity firm started by former Cisco Systems executives. Additional investors include Eight Roads Ventures, Goldman Sachs, INCJ, Japan Post Investment Corp. (JPIC), NTT DoCoMo Ventures and Wilson Sonsini (WS) Investments.

Cloudian plans to use about two-thirds of the money to expand its global sales, marketing, service and support efforts, and the rest will bolster its engineering work, according to Jon Toor, the company’s chief marketing officer.

Toor said Cloudian currently employs about 165 people in North America, EMEA and a recently opened office in Australia. He said the company plans to add local staff in regions such as Eastern Europe, Spain, and possibly Dubai.

Cloudian storage plans
Toor said the Cloudian storage engineering team’s areas of focus will include expanded Amazon S3 API functionality, additional partner qualifications and certifications, and further integration of  and HyperFiler technology. Cloudian in March completed the acquisition of Milan, Italy-based Infinity Storage, which previously worked with the vendor on HyperFile.

“There’s always things that customers are looking for. For instance, in media and entertainment, they’re always looking for functionality that makes information easier to find,” Toor said. “As we go into more and more use cases, we identify new and different opportunities to improve the product and make it more suitable for those use cases.”

Cloudian had significant momentum heading into the year. The startup finished 2017 with 3x revenue growth and its customer base growing past 200. CEO Michael Tso said the vast majority of sales went through value-added resellers by the end of the year, indicating to him that the product was “ready for a broader channel.”

Substantial Cloudian partnerships include an OEM deal with Lenovo and an EMEA-based reseller agreement with Hewlett Packard Enterprise. Others include Cisco, Microsoft Azure, Google Cloud Platform and Rubrik.

The customer base for Cloudian storage tends to be industries that need to store large files and data sets, including health care, media and entertainment, and manufacturing. Toor said the company is also seeing growth in Internet of Things (IoT) use cases that require highly scalable, distributed storage systems to store data cost effectively.

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Well, for object-based storage software providers it is time to go big and IPO or get bought. That said, there has yet to be an object-based storage software vendor who has gone through an IPO. Companies like Amplidata, Cleversafe, and Ceph were bought by Western Digital, IBM, and Red Hat respectively. Cloudian and Scality have received more funding than the other object-based storage vendors, so there is a possibility that one or both of them could have an IPO in their future. Their biggest hurdle will be getting annual revenue into the $100 to $200M range which is generally considered the sweet spot for going public. Mike Tso at Cloudian and Jerome Lecat at Scality have each entertained the notion of an IPO in their future. The question is whether their investors are "long-term greedy" and willing to delay their big "payday" by through the IPO process. Cleversafe, which received approx. $128M in funding sold itself to IBM for $1.3B back in 2015. Cloudian and Scality have received more funding which should put their selling prices around $2B.