Storage Start-Ups in 2018

Since 1998 we analyze the start-ups in the worldwide storage industry, which has allowed us the proper perspective from which to gauge the evolution over time.

2018 was not great year in term of financials deals: few M&As and financial rounds for start-ups.

VCs were less reluctant to invest in storage. The number of financial rounds in 2018 is the lowest since 1999 with 38 – compared to 48 in 2018,- but with biggest rounds for a total amount of $1,442 million up 12% from $1,291 million in 2017.

The highest round last year was $250 million for Cohesity then $100 million for both Actifio and Cloud Constellation, being $180 million for Rubrik in 2017, $175 million for SimpliVity in 2015, and $900 million for Cloudera in 2014.

NUMBER OF FINANCIAL ROUNDS FROM 1996 TO 2018

(Source: StorageNewsletter.com)

LARGEST FINANCIAL ROUNDS IN 2018
(at $60 million and more)

(Source: StorageNewsletter.com)

There was 9 rounds at $60 million and more last year. N° 1 Cohesity with $250 million this time got already  $90 million in 2017 and $55 million in 2015, with now a total at $410 million. Actifio also surpasses $300 million in 2018 in total funding with $307.5 million.

Why not better in 2018?
The worldwide storage market is no more growing so fast and then not a real good opportunity for investors. Furthermore in the more popular technologies attracting users (SSDs, all-flash systems, software-defined storage, scale-out NAS, hyperconverged platform, cloud storage), there are already too many competitors including about all storage giants.

Furthermore, there is currently about no new killer technology that could convince VCs, just improvements.

Less New Start-Ups
Also worrying is the reduced number of start-ups founded since the heydeys of 2000 when 97 new entities sprang up in a single year. We were only able to turn up only one new firm, Hammerspace, launched last year vs. 7 in 2017, 15 in 2016, 19 in 2015 and 25 in 2014, while these figures will go up as more of start-ups, operating in stealth mode, will come to light. For example, we found only 2  firms born in 2017 at the same time last year, this figure now being increased to 7 now discovered.

One of the reason is that the number of M&As is largely decreasing and often start-ups are created by people leaving acquired companies.

NUMBER OF STORAGE START-UPS LAUNCHED EACH YEAR SINCE 1996
(when the born year is known)(Source: StorageNewsletter.com)

2018 Good Year in Financial Funding
The average amount per round in 2018 is impressive, $38 million, a record since we investigate this market – excluding 2004 with $42 million -, increasing yearly 41%, from $27 million last year.

Investors put much more money in less start-ups.

These past 14 years, VCs have put $28 billion in storage start-ups. This amount is higher than the total figure in the table below ($17.8 billion adding all rounds) because, for several firms, we got the total invested but not the details per round.

On average, a company got historically $51 million in total funding, the average per round being $17 million.

ALL FINANCIAL ROUNDS FROM 2003 TO 2018
(only for start-ups releasing the amount of their financial rounds)

* in $ million
(Source: StorageNewsletter.com)

TOTAL INVESTED IN START-UPS FROM 2003 TO 2018 ALL ROUNDS INCLUDED
(only for companies releasing or calculated total amount invested)

* in $ million
(Source: StorageNewsletter.com)

PER ACTIVITY AMONG CURRENT 495 ALIVE START-UPS

Total is more than 495 as some companies are listed with more than one activity.
(Source: StorageNewsletter.com)

Where Are They Going?
What becomes of all these storage start-ups after we identify and count them. The conclusion is not really reassuring, a reminder that investment in these sorts of companies is in fact highly risky.

On all start-ups identified, only 4% eventually go public, and thus allow investors generally more than just to recoup their original stake. The same is generally true for the 29% that find buyers, although the asking price is not always greater than the total of all sunk investments. It is, in any case, the emergency exit that many companies are seeking. Meanwhile, another 18% just vanish off the map – doors closed.

Half of all alive start-ups remain in a holding pattern, still a start-up, still nursing the secret hope of an offer from a storage giant seeking to fill-in a missing technology.

WHAT HAPPENED TO THEM SINCE 1978
(out of a total 967 start-ups)

(Source: StorageNewsletter.com)

13 start-ups found a buyer or merged in 2018 – 19 in 2017 – the biggest deal last year being X-IO Technologies sold to Violin for $87.5 million. HPE was an avid acquirer in 2017, buying Nimble Storage for $1.09 billion and SimpliVity for $650 million but only one (BlueData) in 2018.

There was just 4 IPOs in 2015 and 2 in 2016 as well as in 2017 but only one in 2018, by Dropbox, raising an historical record of $1.7 billion.

These facts demonstrate that, to get more money to finance the growth of young companies, IPO seems today a better way than an acquisition.

37 IPOs IN STORAGE INDUSTRY

* in $ million
** became public via a merger with Network Peripherals
(Source: StorageNewsletter.com)

WHERE DO 495 CURRENT ALIVE START-UPS COME FROM
Storage is mainly an US sport.

* Several start-ups were funded in Israel but transferred HQs in USA
(Source: StorageNewsletter.com)

HISTORICAL RECORDS IN TOTAL FINANCIAL FUNDING
(more than $200 million)

* in $ million
(Source: StorageNewsletter.com)

SEVEN START-UPS (known thus far) BORN IN 2017

(Source: StorageNewsletter.com)

ONE START-UP (known thus far) BORN IN 2018

ALL 39 FINANCIAL ROUNDS IN 2018

* in $ million
(Source: StorageNewsletter.com)

Note: when there are more than one round of financial funding the same year, we add them considering the total as only one round.

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