$68M Round Puts Kaminario Back in the Flash Data Storage Mix

It’s an exciting time to be in data storage, according to Kaminario founder and CEO Dani Golan. Flash memory is revolutionizing the industry, creating billion-dollar opportunities for companies like Kaminario, a Newton, MA-based company that builds all-solid-state data storage systems for enterprise customers. He also says it’s an exciting time to be at Kaminario, which just added another $15 million to the $53 million Series E round the company raised in December. The recent influx of cash brings the total raised by Kaminario to $143 million—making it one of the better-funded tech companies in the Boston area.

And it’s exciting for another reason: Kaminario is one of a number of well-financed startups competing with global giants like EMC and IBM for a piece of the action as companies around the world ditch their old hard-disk drive technology, build new data centers, and create private clouds.

That’s why the company will use the $68 million it recently added to its war chest to expand internationally, build out a global sales force, and raise its profile in the next year, Golan said.

“This is a once-every-30-years revolution. It’s way bigger than storage by itself. It’s the one last layer in the IT stack that’s stayed behind, and as such the market is huge,” Golan said. “And it’s moving toward all-flash much faster than people anticipated.”

As evidence, Kaminario points to a report from 451 Research that estimates the all-flash array market will grow from $580 million to $3.4 billion by 2018.

A new, rapidly growing market that big doesn’t go unnoticed. IBM and EMC have each acquired solid-state memory startups in the past few years as they try to maintain their place in the data storage market. Meanwhile, startups like Pure Storage and SolidFire are making inroads. Pure Storage has raised $470 million, including $225 million in a Series F round last year that valued the company at more than $3 billion, while SolidFire has raised $150 million following an $82 million Series D round last year.

New investors in Kaminario include Silicon Valley Bank’s venture capital arm, Lazarus Hedge Fund, and an unnamed public company. They joined existing investors Sequoia Capital, Pitango, Globespan, Tenaya, and Mitsui, which all reinvested in the recent round.

But while those investors are eager to back Kaminario, analysts at 451 Research and Gartner have questioned whether Kaminario has fallen behind its rivals in gaining attention and market share.

Golan views the issue differently. He thinks Kaminario’s competitors are taking different design approaches and targeting different market segments. Golan thinks Kaminario has found its niche by offering a product that both scales up—meaning more storage capacity can be added relatively cheaply—and scales out, which is a more expensive option that adds capacity along with more processing power, speed, and performance. In Golan’s view, the systems other companies have designed are only able to do one or the other.

There’s considerable debate in the industry about which approach is better, or even if the distinction is becoming meaningless, but for Kaminario the flexibility is its key point of differentiation.

“We’re the best of both worlds, and that’s what allows us to be much more economical,” Golan said. The company has heavily emphasized that point in its marketing, saying it can offer customers a price of only $2 per gigabyte of capacity.

That price point opens up the category of customers that Kaminario identifies as midrange and large enterprises that make $100 million to $5 billion per year. Golan said the company is going after that market hard, and he believes the others are looking elsewhere.

“The big guys are usually focusing on Global 1000 companies, so because we’re focusing on midrange enterprises, the market is not that crowded, actually,” Golan said. By Kaminario’s measure, about 50 percent of the money spent buying new solid-state storage systems will come from that tier of companies.

While Golan said the new investment allows Kaminario to be aggressive, he wants it to stay focused on growth. Long-term issues like preparing for an exit in the form of an IPO aren’t at the forefront of his mind.

“We’re not in a rush to go public,” Golan said. “We feel that as a private company we’re moving faster, and there are many advantages to staying private these days.”

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