PolyServe Lands $20M, Talks IPO

Storage clustering specialist PolyServe Inc.'s management has a dream of taking the company public in the next couple of years. But for now, more venture capital will do.

Specifically, the company has $20 million in new funding, led by Fidelity Ventures and existing investors, officials said today. "We're very pleased. We're building this thing for the long term," says Michael Stankey, chairman, CEO, and president.

PolyServe, based in Beaverton, Ore., sells a server-spanning file system that runs atop storage area networks. The product family, called Matrix, serves as an alternative way to administer large amounts of data storage, rather than just being used for availability and management benefits, which was the five-year-old company's original focus.

According to Stankey, PolyServe competes for Windows customers against traditional network-attached storage vendors like Network Appliance Inc. (Nasdaq: NTAP), and for Linux customers against Red Hat Inc. (Nasdaq: RHAT) and Veritas Software Corp. (Nasdaq: VRTS). It doesn't have a Unix product because Veritas already dominates in that sector, he says.

They'll use the cash influx to bolster operations. "Sales, marketing, and customer support are our three main areas," Stankey says, adding that the company hopes to be profitable by mid-2005, and that's when it will consider an IPO more seriously.PolyServe has about 300 customers, from small businesses to major outfits like Amgen, Nike, and the U.S. Army, and Stankey promises an iSCSI product launch later this year.

Besides investors like Greylock, New Enterprise Associates (NEA), and Roda Group, the company is also tight with Microsoft Corp. (Nasdaq: MSFT). PolyServe licenses Microsoft's Installable File System Kit, and Microsoft helped PolyServe recruit employees. However, "We are not looking to be acquired," Stankey insists, discouraging any ideas that the company was based on a to-be-acquired-by-Microsoft business plan.

But some analysts wonder whether it's a good thing that PolyServe's still independent, and they wonder how it can distinguish itself in the ongoing consolidation.

"All this acquisition has happened in the past 12 to 18 months. What's going on with these guys?" asks John Humphreys, an analyst with IDC. "The market seems like it's rapidly consolidating. It seems to be the vendors with the most strength are the system folks as well as people like Veritas."

Humphreys points out that what PolyServe is talking about is data center virtualization, but everybody has a different approach to that. The server companies like IBM Corp. (NYSE: IBM) and Sun Microsystems Inc. (Nasdaq: SUNW) have already acquired many small companies in the space. "What I'm wondering is: Where's their courting?"Evan Koblentz, Senior Editor, Next-Gen Data Center Forum