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What Is the Fate of Data Storage Startups in the Long Term?

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Data storage startups in the long run

In the previous part of the series, we saw that a wave of startups has hit the data storage space. But do these startups have the capacity to sustain themselves in the long run? “You get these waves of startups. Some wouldn’t last; a couple would be acquired; one or two would do really well and go public. Then usually one of the big guys would step in and pay a substantial premium to acquire them,” said Simon Robinson, research vice president for storage and information management with 451 Research.

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As seen from the above table, a total of 847 startups emerged in the data storage space between 1978 and 2014. According to Storage Newsletter, 28% of the startups were acquired and 19% were closed. However, only 3% of these startups were successful in going public. A company goes public when it lists itself on the stock exchange to raise money by selling its shares to the general public.

How was 2014 and 1H15 for data storage startups?

Many startups emerged with new technologies in 2014 and 1H15. For example, DataGravity and Primary Data launched their products in 2014. Some startups raised millions of dollars. Cloudera raised $900 million in funding, of which $740 million came from Intel (INTC). Qumulo raised $40 million in funding.

Some startups were acquired by market leaders. EMC (EMC) acquired four cloud startups, namely Twinstrata, Maginatics, Spanning, and Cloudscaling in 2014. A Western Digital Corporation subsidiary, HGST acquired cloud storage solutions provider Amplidata in March 2015.

Some startups have also gone public recently. Cloud storage startup Box (BOX) went public on January 23, 2015, on the New York Stock Exchange.

A few data storage startups have formed partnerships with tech leaders. Hyper-converged infrastructure startups, such as Nutanix and SimpliVity, and software-defined storage startups, such as Cleversafe and Scality, formed partnerships with global systems vendors like Dell, HP, and Cisco (CSCO). Under these partnerships, startups are integrating their products with global systems vendors in order to tap their customer base.

If you are bullish about Intel and Cisco, you can invest in QQQ (QQQ). The fund has a 2.75% holding in Intel and 2.68% in Cisco.

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