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Investors go the StorageWay

One week after securing a foothold next to StorageNetworks, Inc. in Exodus, Inc.'s Internet co-location centers, storage service provider (SSP) StorageWay, Inc., has managed to score $36 million in new venture funding, bringing its total VC investment to $48 million. Additionally, the Fremont, Calif.-headquartered SSP has raised more than $56 million in debt financing. StorageWay said that the new injection of cash will be used for both ongoing product development and the build-out its infrastructure at co-location centers.

The funds are good news for StorageWay, since the cost of building the infrastructure for a SSP is a big hurdle to overcome. "Getting an SSP off the ground and airborne is a capital-intensive proposition," said John Webster, analyst for Illuminata, Inc. "One has to build infrastructure, management software applications, and staff. All of that takes serious money. VCs are good sources, but owning a gold mine of two could also help."

Though SSPs in general represent a fairly new model for storage, StorageWay considers itself an example of a "next-generation" SSP. The company focuses its business and underlying architecture of its product offerings on Internet-related businesses and business units. StorageWay launched its new managed storage utility service in June with the introduction of two products, OutStore and OutBackUp. The recent financing will be applied in part to the ongoing development of these and follow-on products.

Doug Chandler, program manager for the Framingham, Mass.-based International Data Corp., said that getting through a second round of funding is a critical step. "Basically this gives StorageWay more money to invest in its operations, to state the obvious. I've heard unsubstantiated rumors that Centripetal, for example, didn't make it to a second round and may have to curtail operations. So getting that second round of [funding] is good news for StorageWay, or any other start-up for that matter."

StorageWay has deployed storage data centers in 10 location sites nationwide. By the end of the first quarter of 2001, the company expects to have 35 data centers worldwide.

Let us know what you think about the story, e-mail Kevin Komiega, assistant news editor

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