SASI 1H 2019 Data Management Review: Venture Funding Breaks $800M While Smaller “Tuck-In” Deals Dominate M&A

1H 2019 M&A Highlights:

  • 1H 2019 had 12 deals totaling $734.0M compared to 19 deals with $853.3M in total consideration in 1H 2018.  We expect to see more “tuck-in” deals in the 2nd half of 2019 plus some larger exits from well-funded start-ups reaching that 7-8 year mark.
  • Notable transactions in the 1st half of the year include NetApp’s purchase of Cognigo, showing that they continue to be one of the more aggressive buyers as they broaden out far from their NAS roots.  Pure makes its’s second “tuck-in” deal with Compuverde while AWS moves on CloudEndure, bringing a needed DRaaS on-ramp to their cloud platform.  After 14 years, Nexenta finds a home with DDS while Veritas pays up $10M for Aptare in an effort to broaden their analytics platform.  The largest trade in the first half was our only public/public deal with Qlik Tech acquiring Attunity for $560M at a modest Price/Revenue multiple of 6.44x.  Attunity’s data integration and management solutions will expand Qlik’s enterprise data analytics platform.  Druva, which offers SaaS-based data protection, backup and management solutions, made its first acquisition with Cloudlanes and also hauled in $130M in funding.
  • More and more we are seeing late stage start-ups buying up smaller players in an effort to rapidly expand their product suite and develop teams.  We see this trend continuing well into 2020.
  • Going into the second half of 2019 and into 2020, we also expect MSFT/Azure, Google, AWS and other leading incumbent cloud infrastructure providers to “bulk up” on their enterprise class data management offerings through M&A.   With large enterprises leery of cloud “lock-in”, we see data mobility being critical along with overall data management across clouds and on-prem.  Kubernetes/cloud native and related data management challenges will also be a target area for M&A and further venture investment.

1H 2019 Venture Funding Highlights:

  • 1H 2019 Funding increased 30% to $804.1M from 1H 2018 of $618.6M.  Rubrik led the strong first half showing with a $261M 5th round of funding followed by Druva with a $130M 7th round of funding.  VAST Data raised the third largest round with a healthy $80M 2nd round. There were also five 1st rounds of funding across a spectrum of data management solutions showing that there is plenty of innovation and opportunities to disrupt the data management market.
  • In the memory space, investors double down on MRAM memory provider Avalanche with a $33M 7th round and MemVerge (distributed memory platform) hauled in a $24.5M 1st round of funding.  Lightsbits, providing NVMe-oF solutions, had the largest 1st round of funding, bringing in an impressive $50M from VCs and strategics including, Cisco, Dell and Micron.

For the entire report, please contact John Rotchford at john@sasillc.com.

VCs Pour $2 Billion into 40 Container Start-Ups Across 5 Segments

Released by Docker in 2013, containers have emerged as the driving force behind the cloud native movement and the fundamental re-design of how applications are developed, deployed and managed.  Yes, it is certainly early days for containers but with $2 billion invested across 40 start-ups and already 10 container related M&A transactions in 2018 alone, containers are quickly moving from a “cloudy” open source initiative to transforming how cloud operators, SaaS providers and enterprises manage their applications and IT infrastructure. Without diving too deep into the weeds, I can tell this emerging area is complex with a ton of moving parts and just trying to decipher exactly who plays in what bucket can be challenging.

While far from perfect, we settled on five main funding buckets: DevOps/CI/CD, Management, Security, Monitoring and Data Management.  In DevOps/CI/CD, we put together start-ups that tended to focus on tools and services for application development vs. pure management and operations platforms. This group has raised $323M or 16% of the total. Management is a broad category covering orchestration to containers/Kubernetes as a service. The 11 start-ups in Management have raised $637M or 31% of the total. Security has the most starts-ups with 14 and has raised $407M or 20% of the total.  Monitoring is another well-funded area with 4 start-ups raising $504M or 25% of the total. Lastly, Data Management covers those start-ups focused on storage and data protection/mobility for containers. With 7 start-ups, Data Management has raised $157M or 8% of the total.   The top 5 funded starts-ups are Docker, Mesosphere, Sumo Logic, GitLab and Data Dog with $272M, $247M, $230M, $166M and $148M in total funding respectively. The top 5 total to $1.06B or 52% of the $2B raised to date.

SASI Insights:

  • The container/cloud native movement shows no sign of slowing down with 8,000 attendees at Kubecon/CloudNativeCon in Seattle late last year with a few hundred people “hanging out” hoping for a spot to open up.
  • Container orchestration is a critical piece of the scaling and management puzzle and by most accounts, Kubernetes is becoming the de-facto standard. This certainly raises questions around the strategic direction of Mesosphere and Docker with its Swarm orchestration platform.
  • Leading IT players and the core development community seem to be playing well together and avoiding the missteps of OpenStack.
  • Think big and very broadly about containers/cloud native/Kubernetes/micro services, etc. as these frameworks will have significant impact across public and private clouds, on-premise infrastructure and hybrid models.
  • There are certainly container skeptics but there seems to be a shift from questioning market adoption to questioning underlying business models of these venture backed companies.
  • The $2B in venture funding is certainly impressive as is the over $1.2B in container specific venture M&A over the past two years.  There have also been mega open source/container relevant deals with IBM/RedHat for $34B and Microsoft/GitHub for $7.5B.   Other active strategic buyers include VMWare, HPE, Oracle, Cisco, NetApp and Nutanix. Keep an eye out for our full container M&A report due out next week.   See SASI’s Container Venture Market Map at the link below.
https://www.linkedin.com/pulse/vcs-pour-2-billion-40-container-start-ups-across-5-john-rotchford/

SASI advises ClearSky Data on Recent Capital Raise

SASI advised ClearSky Data on strategic partnerships and investment opportunities and engaged with leading technology providers that could leverage ClearSky’s disruptive data management services. Keys to success included understanding and conveying ClearSky’s technology and service models, identifying top candidates and their strategic relevance to ClearSky and driving negotiations and process details to a successful outcome.

ClearSky Data, provider of on-demand primary storage with built-in offsite backup and disaster recovery (DR) raised $20 million in new funding. New investors include a market-leading technology provider and Pear Tree Partners, L.P., in addition to participation from existing investors: General CatalystHighland Capital Partnersand Polaris Partners. The company has raised $59 million to date. ClearSky will use the funds to accelerate customer deployments, sales and go-to-market activities.

ClearSky is experiencing strong business momentum in all areas, already more than doubling year-to-date revenue over its last full fiscal year, and rapidly growing its customer base to include cloud-forward companies like Partners HealthCare, Massachusetts General Hospital, Nuance Communications and Unitas Global. Also announced today, the company is expanding its U.S. footprint in partnership with Equinix, who manages the world’s largest global platform of interconnected data centers and business ecosystems.

ClearSky transforms the way enterprises manage and consume data by replacing capital and time-intensive deployments with a single, durable copy of data that’s available anywhere and is consumed as a service. ClearSky’s patented edge-based service automatically optimizes data across its lifecycle, giving enterprises limitless data access from multiple locations, complete with flash performance, comprehensive protection and management simplicity.