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Scale Eight closes its 'final' funding round

Internet-based storage service provider Scale Eight bagged $23 million in its third and final round of funding.

San Francisco - Internet-based, global-storage provider Scale Eight will announce on Monday that it has closed a $23m third round of funding. The company says it plans to use the money ? which comes from lead investor Oak Investment Partners, as well as from new investor Star Ventures and returning funders InterWest Partners, CenterPoint Ventures and Crown Advisors ? for sales and marketing operations, as well as for new research and development. Scale Eight, which has raised a total of $54.5m, says it is now fully funded and plans to be cash-flow positive by late 2002.

San Francisco-based Scale Eight developed its storage technology with Internet and media companies in mind. Its proprietary parallel systems technology takes the storage capacity of hundreds of processors and thousands of disks in order to achieve extremely large amounts of storage. As the company can easily add storage capacity by stringing on additional processors and disks, it sells its service on the idea that it offers high scalability at a cost much lower than traditional storage providers.

Director of corporate communications, Dave Donohue, said Scale Eight is now focused on getting its service in front of as many potential customers around the world as possible. So far, it has built storage centers in London, Tokyo, San Jose and Virginia, and it has sales offices in New York, Boston and London. About 60% of its business comes from the United States, with the remainder largely in Europe. The next major push is Asia, particularly Japan.

Although the new money should enable Scale Eight to reach profitability ? something it expects to achieve late in 2002 ? Donohue said that Scale Eight executives are in continuing discussions with several strategic investors. It's talking to other players in the storage industry, as well as those in IT-equipment manufacturing and venture capitalists in Europe and the Pacific Rim, geographic areas in which the company would like to be better represented.

In recent months, the company has signed several new customers, including Microsoft's MSN music services. It currently has 85 employees, but there are plans to increase that figure to over 100 by the end of the year.

Many of the companies Scale Eight used to count as competitors have fallen by the wayside, or have at least had no choice but to scale back their business models. Instead of buying storage devices and then hosting storage capacity for customers, many are continuing to offer hosted storage, but are being forced to ask the customers themselves to buy the equipment, Donohue said.

In the meantime, the biggest battle is against many potential customers that continue to buy and run their own storage systems. "Our main competition comes from customers who believe they can do this themselves," said Donohue. "We have to change that perception."

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