IPO-Bound Pure Storage Lands $150 Million Funding Round Led by T. Rowe Price
Pure Storage, a company that makes storage arrays based on flash-memory chips, will announce today that it has landed a $150 million Series E round of funding from a group of investment banks and a private equity fund.
The round was led by investment firms T. Rowe Price and Fidelity, and the hedge fund firm Tiger Global Management. Its prior venture capital investors Greylock Partners, Index Ventures, Redpoint Ventures, Samsung Ventures and Sutter Hill Ventures all participated, as well. It’s being described as the biggest round of financing for a data storage company, ever.
Additionally, Frank Slootman, the CEO of ServiceNow, a cloud-based customer service software company, will rejoin the company’s board. He’s also the former CEO of storage company Data Domain and saw it through its IPO process, and will bring that expertise to the board as a “key advisor.”
The round brings Pure’s total capital raised to $245 million. I couldn’t get a precise number on the implied valuation, but it is above $1 billion and below $2 billion. Pure has been rumored to be carrying a valuation north of $1 billion for some time, so I’d estimate the number to be at the upper end of that range.
Pure’s last funding was a strategic investment round that came from In-Q-Tel, the venture capital arm of the U.S. Central Intelligence Agency. The amount was undisclosed. Before that, it landed a $95 million Series D led by Index Ventures.
The announcement comes in the wake of the IPO filing on Tuesday of Violin Memory. Since both companies make flash-based storage arrays, and are both young companies, they are widely thought of as competitors.
I asked CEO Scott Deitzen (pictured) about that. “About 80 percent of the time, when we go after deals, we don’t usually see them competing against us,” he told me. “But we do see NetApp and EMC,” the two most established players in enterprise storage.
If the investment rounds looks familiar, it is because Pure is deliberately following the path mapped out by Workday, the cloud-based human-resources software company that went public last year.
About a year before it went public, Workday raised $85 million from T. Rowe Price and Fidelity.
Where did Deitzen get the idea? It just so happens that Workday co-CEO Aneel Bhusri sits on Pure’s board. “We’re very closely studying the Workday playbook,” Deitzen said.
Pure came out of stealth mode two years ago this week with $55 million in funding and an ambitious goal: To build flash-based storage that is competitively priced with hard-disk-based storage.
Dietzen and Pure’s president Dave Hatfield told me that the company is on track to deliver storage arrays that can deliver the speed and power efficiency that comes with flash memory, but which are priced about the same as disk-based arrays.
The trick, they say, is cutting back on the amount of data that you have to store, using de-duplication and compression techniques.
So far, the approach has worked. Pure has landed numerous customers at investment banks, telecommunications companies, pharmaceutical companies, software makers and in the intelligence community.
It’s also growing quite a bit globally. Sales in Europe and Asia are growing “twice as fast as we expected,” Dietzen told me, and the company added sales operations in 10 countries in seven months.
But there’s one way in which it differs from other flash-based companies like Fusion-io and Violin. Pure sells almost exclusively through resellers. That prevents it from one of the main problems that flash companies have tended to suffer from: A high concentration of revenue from a small number of large customers.
For example, Fusion-io’s fortunes have tended to rise and fall over whether or not its biggest customers, namely Facebook and Apple, are building out data centers. And when HP stopped reselling Violin’s arrays as part of its storage portfolio, a big chunk of business that at one time represented as much as 65 percent of revenue went with it. Dietzen told me that no one customer accounts for more than one percent of sales.
The funding will help pay for an expansion of operations. The plan calls for boosting the number of resellers, now numbering in the hundreds, to north of 1,000. A few early customers bought directly from Pure, but Hatfield told me that the plan is to become a 100-percent channel-driven business as soon as possible. The sales pipeline is growing by about 42 percent a quarter, and bookings, an indicator of anticipated revenue, are growing at a clip of more than 50 percent a quarter.