SimpliVity Becomes Rare $1B Unicorn Following $175M Round

It took SimpliVity, an IT infrastructure company based in Westborough, MA, a few years to get out of the gates. But now the company is off to the races, following a $175 million Series D round that gives the company a post-money valuation north of $1 billion, making it a rare “unicorn” for the New England tech industry.

SimpliVity was founded in 2009 with a vision to “simplify IT,” according to founder and CEO Doron Kempel. For SimpliVity, that means taking almost all the hardware used in legacy IT infrastructure—including the server, the systems for storage, backup, networking, and security, and other components—from assorted vendors and packing it down into a single product made by SimpliVity.

What SimpliVity is doing is part of an IT industry trend toward converged infrastructure, also known as “hyperconvergence.” To date, Kempel said, that usually means combining just the server and storage system into a single component. SimpliVity takes it a few steps farther, adding in the solid-state storage array, backup appliance WAN (wide area network) optimization appliance, and backup apps.

“We’re taking the idea of simplification, of reducing a very large and complicated set of products into building blocks, to the logical conclusion,” Kempel said.

Waypoint Capital, a new investor, led the round, putting $150 million into the company. Prior investors Accel Partners, Kleiner Perkins, Meritech Capital Partners, DFJ Growth, and Charles River Ventures (CRV) joined in. The round brings the total SimpliVity has raised to $276 million—making it one of the most heavily funded tech companies in Massachusetts history.

By one measure, it’s taken SimpliVity a while to get here. Kempel said SimpliVity spent about four-and-a-half years developing its system, which it calls the OmniCube. He admits that’s about twice the time it takes most IT infrastructure startups to bring a product to market, but he said it was time well spent.

“Why so long? The code is homegrown. In order to accomplish the technological mission, we had to develop everything. There weren’t any elements in open source we could have fit in,” Kempel said.

But in Kempel’s eyes, SimpliVity’s trajectory is ahead of its peers. He notes that the product only went to market in April 2013, meaning it has been available for less than two years. He said it took Nutanix and Pure Storage 31 and 32 months, respectively, to reach that point after they began sales.

Since its commercial launch, SimpliVity has gained more than 300 customers and deployed more than 1,500 systems. That’s added up to 500 percent year-over-year revenue growth. The company’s headcount has been similarly expanded, growing to more than 400 by the end of last year.

Those figures look good, but the biggest attraction for investors likely is the potential market size. Kempel cites numbers putting the total spent per year on the types of IT infrastructure SimpliVity wants to supersede at about $107 billion.

“There’s a massively large market,” Kempel said. “We think that all of that is in play.”

SimpliVity says its clients include large companies like Amgen and T-Mobile, and the company is adding features enterprise customers will need to manage their global networks. But Kempel said SimpliVity’s sweet spot might be with mid-sized companies looking to replace their infrastructure with products from multiple vendors into a single turnkey system like SimpliVity’s. Customers in that tier make up about 57 percent of IT spending, he said.

After a few patient years, SimpliVity is now in a hurry to scale to the size Kempel envisions. The money from this round will go toward adding to SimpliVity’s global sales force as well as hiring engineers.

SimpliVity is facing off against IT infrastructure stalwarts such as EMC, Cisco, and VMware, as well as startups such as Nutanix. According to Gartner, the amount spent on integrated or hyperconverged systems last year was more than $6 billion and grew 50 percent in 2014.

Kempel acknowledged those companies got a head start while SimpliVity was still developing the OmniCube, but he believes the strategy has resulted in SimpliVity creating a versatile all-in-one system that rivals won’t be able to match.

Still, Kempel said now is the time to move fast. The latest funding round gives SimpliVity the resources to do that, and it could be the last round the company needs before going public.

“We need to grow as fast as we can execute, and we needed to have the funds. It could be this is that last money we raise before an IPO, but this was not a promise we’re making,” Kempel said. “At some point in time this company is going to have an IPO, but we don’t want to put our finger on a month…but it’s in the foreseeable future.”

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