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Pivot3 revenue growth stokes IPO talk

Pivot3, one of the last small independent hyper-converged infrastructure (HCI) vendors left, is on a growth path that its CEO said could lead it to going public within two years.

The vendor report its first quarter 2018 bookings increased more than 60% over last year, with two-thirds of its sales coming from Fortune 1000 companies.

Pivot3 CEO Ron Nash said the early HCI vendor is on pace to hit profitability and complete an initial public offering of stock within 18 to 24 months. He said the 250-employee company that has not raised venture funding in two years will probably not need any more funding until then. Since its 2003 launch, Pivot3 raised $253 million in funding with the last round of $55 million coming in early 2016.

“We substantially reduced our loss over the past three or four quarters,” Nash said.  “We’re on our path to break even, and we’re planning to drive to profitability before we IPO. I want us to be ready to be a public company before we do our IPO.”

Nash attributed recent Pivot3 revenue growth to it selling to larger customers, customers running several applications instead of one app, buyers expanding their deployments.

He said Pivot3’s early video surveillance customers are now buying Acuity HCI appliances, and Acuity customers are adding Pivot3 video product. Nash said the larger and multi-app deployments are partly a result of Acuity’s early use of NVMe inside HCI appliances as well as its quality of service.

The claimed Pivot3 revnue growth is in line with —although slightly below — the rest of the HCI market. No industry-wide figures are available yet for the first quarter, but IDC put HCI worldwide revenue growth at 68% in the third quarter of 2017 and 69.4% in the fourth quarter. Pivot3 claimed its revenue increased 50% in the third quarter and 65% in the fourth.

Like many emerging technologies, HCI began with startups before large vendors jumped in. The early players were Nutanix, SimpliVity, Pivot3, Scale Computing, Maxta and a few others. Now Nutanix is a public company, SimpliVity is part of Hewlett Packard Enterprise and the HCI market is dominated by large vendors.

The recent Gartner Magic Quadrant for HCI listed Nutanix, Dell EMC, VMware and HPE as leaders. Pivot3 made the challenger quadrant along with Cisco and Huawei. That puts Pivot3 up against large established vendors in most of its deals.

One of Pivot3’s biggest challenges is what Nash calls “big legacy companies playing big-boy bad behavior.” By that, he means the large vendors who were slow to embrace hyper-convergence will try to raise concerns about smaller companies when they talk to potential customers. If that fails, they will deeply discount their products.

“First, the big boys deny the new technology is better,” Nash said. “Then when the new technology companies start to make breakthroughs, the big boys give a discount. But over the long term, no one has ever protected a market long term by doing that. It only slows the erosion.”