Storage Start-Ups in 2016

2016 was globally the worst year for start-ups. VCs were much more reluctant to invest in storage. There were only 36 financial rounds during the year, the lowest figure since 2003 (!) for a total amount of only $907 million, the lowest amount since 2011, about twice less than the former year. The highest round was $77 million for Upthere in 2016, $175 million for Simplivity in 2015, and $900 million for Cloudera in 2014.

NUMBER OF FINANCIAL ROUNDS FROM 2003 TO 2016

 (Source: StorageNewsletter.com)

LARGEST FINANCIAL ROUNDS IN 2016
(at $50 million and more)

(Source: StorageNewsletter.com)

Why?
The worldwide storage market is no more growing and then not a good opportunity for investors.
Furthermore 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.

There is currently about no killer technology that could convince VCs, just improvements.

Fewer 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 4 new firms launched last year vs. 13 in 2015 and 23 in 2014, while these figures will go up as more of them, operating in stealth mode, will come to light. For example, we found only 6 born firms in 2015 at the same time last year, this figure being increased by 7 more entities discovered later.

NUMBER OF STORAGE START-UPS LAUNCHED EACH YEAR SINCE 1996
(when the born year is known)

(Source: StorageNewsletter.com)

2016 Far to Be a Record in Financial Funding
The average amount per round decreases yearly 17%, from $30 million to $25 million.

Investors put less money in fewer start-ups.

These past 14 years, VCs have put $23 billion in storage start-ups. This amount is much higher than the total figure in the table below ($16 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 $45 million in total funding, the average per round being $18 million.

ALL FINANCIAL ROUNDS FROM 2003 TO 2016
(only for start-ups releasing the amount of their financial rounds)

* in $ million
(Source: StorageNewsletter.com)

TOTAL INVESTED IN START-UPS FROM 2003 TO 2016 ALL ROUNDS INCLUDED
(only for companies releasing total amount invested)

* in $ million
(Source: StorageNewsletter.com)

PER ACTIVITY AMONG CURRENT 472 ALIVE START-UPS

(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 3% eventually go public, and thus allow investors generally more than just to recoup their original stake. The same is generally true for the 28% 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.

51% of all start-ups of them 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 910 start-ups)

(Source: StorageNewsletter.com)

Only two start-ups did find buyers in 2016 and 13 in 2015, the biggest deal last year being SolidFire acquired by NetApp for $870 million. The acquisitions  last year: Initio by Sage Microelectronics and NexGen Storage by Pivot3 for unknown price.

There was just 4 IPOs in 2015 and 2 in 2016 (EverSpin Technologies raising $40 million and Nutanix getting $238 million after $370 million in total financial funding). Pure Storage raised $450 million in 2014 and Box $554 million in 2015, the highest sum never received by a storage company becoming public. Acronis is on the way to enter into the stock exchange and some other ones could try like like DataCore, Kaminario, MapR, Scality, SimpliVity, Tegile and Tintri.

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

31 IPOs IN STORAGE INDUSTRY

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

WHERE DO 472 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, no one in 2016)

* in $ million
(Source: StorageNewsletter.com)

12 NEW START-UPS (known thus far) BORN IN 2015

(Source: StorageNewsletter.com)

4 NEW START-UPS (known thus far) BORN IN 2016

ALL 36 FINANCIAL ROUNDS IN 2016

* 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.