2017 Storage Funding Highlights

  • The number of rounds dropped to 34 but the total funding jumped up to roughly $1.1B for 2017, driven by later stage funding across a range of product segments.
    • Rubrik led the pack taking in $180M back in May followed by Infinidat with a $95M 3rd round of funding in October.
  • With the constant drum beat of software-defined- “everything” and the continual movement to the cloud, it was surprising to see Systems lead the venture product segment split for 2017 with 53% of all funding.
  • While certainly much of the core IP in these start-ups is software, they have chosen business models incorporating hardware.
    • We believe this is driven by customer demands for products that can be easily installed, configured and managed.
    • Software margins of 80% are attractive to investors but for enterprise customers, manageability, scale and reliability matter and it’s tough to get there without tight hardware integration.

For the full report, contact John Rotchford, Managing Partner, at john@sasillc.com

Private Buyers Dominate the 2017 Storage M&A Landscape

Storage M&A Highlights:
  • While total deal consideration jumped up to $23.5B (primarily due to the announced Toshiba Memory transaction for $18.0B), the total number of transaction dropped to 27 from 34 in 2016.
  • Of the 27 announced transactions, 15 were led by private buyers with 12 companies bought by public entities. Of the 15 private buyers, 9 of them were private equity shops. This is the first time since we started our annual reports in 2005 that private led transactions beat public buyers.
  • Going into 2018, we see a broader range of public buyers entering the storage M&A market but expect private and private equity led transactions to still comprise at least half of the deals.
  • For the second year in a row, we saw very few early stage companies being acquired at attractive valuations. Instead, the M&A market was driven by later stage companies getting acquired at “ho-hum” median price to revenue multiples in the 2.5X range. This shift was driven by a buyer base that that now applies stricter valuation methodologies and is willing to be patient and disciplined on M&A until the new shiny start-up actually shows market validation in this competitive market space.  
  • We see 2018 continuing this trend with deals in the 2X to 5X P/R multiple range with few possibly trending above the 10X range.

For the full report, contact John Rotchford, Managing Director, at john@sasillc.com

Q2 Hits the Brakes on M&A While Venture Funding Places Some Big Bets

Storage M&A:

  • 2017 started strong with 10 deals totaling $1.8B in Q1 but in Q2, buyers hit the brakes with just 4 deals announced
  • The trend of private equity firms acquiring storage companies continues as Quantum Partners acquired Violin, Insight Venture Partners acquired Spanning Cloud and private equity owned Arcserve acquired Fastarchiver
  • Meanwhile NetApp quietly acquired PlexiStor, which is a three-year-old Israel-based startup that has developed software to dramatically improve data access speeds by altering the way data is handled in-memory.  NetApp is looking to the future as persistent memories emerge, especially with Micron and Intel’s 3D XPoint.

Storage Venture Funding:

  • Q2 2017 storage funding was strong at $387M across 7 rounds with an average round size of $55.3M
  • Rubrik’s $180M 4th round was the largest this year to date, bringing its total equity raised to $292M.  Rubrik is disrupting the data protection market by offering data protection appliances that are replacing more costly and complex legacy back-up and disaster recovery platforms.
  • Cohesity raised $90M as it ramps up sales and marketing followed next by Tegile who raised $33M.
  • Qumulo added $30M to its war chest as it goes to battle in the highly competitive scale-out NAS market.
  • Portworx, a storage specialist for containers, brought in $20M as the hype around containers remains strong with the promise of larger use cases and deployments just around the corner

Contact John Rotchford at john@sasillc.com for the full report.