LeftHand Snatches $20M

IP SAN startup LeftHand Networks announced today it has won $20 million in Series B funding on the back of significant customer traction, bringing its total equity investment to date to $39 million. Yaaaaay! Some good news! (See LeftHand Picks Up $20M Round.)

Sprout Group, the venture arm of Credit Suisse First Boston Corp., led the oversubscribed round. Also contributing were LeftHand's existing investors, which include Boulder Ventures, Garage Technology Ventures, Ironside Ventures LLC, Portage Venture Partners, Sequel Venture Partners, Vista Ventures, Wasatch Venture Fund, and William Blair New World Ventures (see LeftHand's Latest Deal and Lefthand Grabs Another Fistful ).

Company executives declined to say whether its valuation rose with the additional investment; in other words, whether it was an "up round" or not. But it expects to be profitable sometime in 2004.

The Boulder, Colo., firm will use the investment to expand its sales, support, and business operations in the U.S. and internationally. "Were not building a huge direct sales force, but we want to be able to pull more end-user business through our reseller channels," says David Bangs, VP of sales and marketing at LeftHand.

Customers are apparently purchasing LeftHand's Ethernet-based storage arrays, which it’s been shipping since late 2001, to address growth of email and database applications, disaster recovery, and disk-based backup, the company says.Recent customer wins include: Quoizel, Wiss Janey Elstner Associates, Mapics, Fresno Pacific University, LA Valley College, Denver Museum of Nature and Science, Vynamics, and Ingersoll Rand. Previous customers include Lockheed Martin, Array Biopharma, and the City & County of Denver (see Engineers Take LeftHand Turn).

"We’re finding that with shrinking budgets and headcounts, companies do not have the funds to put staff through Fibre Channel training," says Bangs. "They have the same issues with applications continuing to grow and backup windows getting smaller... But with IP SANs they get the same functionality to solve these problems at a fraction of the cost, and they don't have to turn the company on its head to plug it in."

Interestingly, LeftHand is gaining traction even though its IP SAN storage arrays use a proprietary technology, the Advanced Ethernet Block Storage (AEBS) protocol. Customers load LeftHand's AEBS software on their servers, and it enables various storage virtualization services. In the past, LeftHand executives have said the company's systems will support iSCSI, the emerging standard for IP block-level storage, once it gains market acceptance (see Microsoft to Unleash iSCSI, NetApp Blitzes on iSCSI, and LSI Lines Up iSCSI Mates).

But inquiring minds might ask: If everything is so hunky-dory at LeftHand, why does it need to raise additional capital and presumably give up more ownership of the company?

"As fast as we're ramping, we do need to fund more sales headcount and to build business operations to give us depth across the country," offers Bangs. [Ed. note: Or perhaps, if someone is offering you $20 million in this market – you take it. Just a thought.]Either way, LeftHand is winning business against incumbents like Dell Computer Corp. (Nasdaq: DELL), EMC Corp. (NYSE: EMC), and Network Appliance Inc. (Nasdaq: NTAP), which deserves a mention in our book.

— Jo Maitland, Senior Editor, Byte and Switch