Teneros Tucks In $40M

Startup Teneros of Mountain View, Calif., has scored $40 million in Series D funding from a range of investors -- the largest round so far awarded to a data protection startup this year. The round, led by Advanced Equities Inc., included Goldman Sachs, NEA, Sevin Rosen Funds, and STAR Ventures. It brings Teneros's total funding to $84.5 million.

CEO Steve Lewis, who founded Teneros in 2003, says he'll use the money to support what he claims is 50 percent quarterly growth. With 92 employees and just over 300 customers, he's aiming to solidify Teneros's position with enterprise customers as well as the SMBs that initially popularized the startup's wares.

"This round was as much about making a competitive and financial statement as it was about funding," he says. Lewis claims Teneros is "very close" to being profitable. But a big investment inspires confidence in enterprise customers, he notes. And it protects against the possibility the VC well might run dry in case of a U.S. recession -- something Lewis, for one, is worried about.

Further, he believes the new round will help keep competitors at bay, at least for awhile. VCs looking to boost other companies in the Exchange continuity space had best think twice, in his view: "Others might look to invest, but they'll have to raise a boatload of cash to come after us!"

Teneros's stock in trade is its Application Continuity Appliance for Microsoft Exchange, which was unveiled in March 2005. The box sits alongside a Microsoft Exchange server (one per Exchange server is required), sifting for corrupted data and then replicating Exchange in the form of message objects such as tasks, calendar items, or emails. The objects are placed in Teneros's own specialized instantiation of Exchange. Remote monitoring and updating by Teneros take care of management functions and make each box a "forgettable" item in the data center.Besides working with Exchange, Teneros's appliance replicates any backup, messaging, or unified communication app that relies on Microsoft journaling, including Blackberry, Goodlink, Microsoft Mobile, and Cisco Unity, to name a few.

On the downside, Teneros's one-box-per-Exchange-server model has established its reputation primarily as an SMB product up to now. Also, despite its support of virtualization within the box, there's no sign that Teneros plans to run as a virtual appliance anytime soon -- which may or may not affect its scaleability.

Lewis claims Teneros competes most closely with block-based replication from Double-Take Software, Neverfail, and XOsoft (now part of CA), as well as with hosted disaster-recovery services. But he insists these suppliers don't guard against copying corrupt data along with the good.

That's a claim Double-Take won't take lying down. "[I]f for some reason, Exchange on the production server misreads the log and corrupts the database, we would replicate those changes as well," concedes Bob Roudebush, director of solutions engineering at Double-Take, in an email to Byte and Switch. "That's why we provide integration with Microsoft VSS to allow you to recover your replicated data from multiple points in time if you have to. [We] also allow you to recover from human error (accidental deletes, etc.) -- something that the Teneros box does not provide."

Despite claims and counterclaims, at least one analyst thinks Teneros's approach is highly valuable. "To me, there is a big difference between data recovery and application recovery," says Arun Taneja of the Taneja Group. Taneja says Teneros, along with a handful of other vendors, including Sonasoft and Cemaphore, maintain "transactional integrity" in applications instead of just replicating block-level chunks of data.So will Teneros start releasing appliances for applications other than Exchange? Only if they are Microsoft applications, it seems. "We are very much a Microsoft ecosystem player," Lewis says. "We'll take on more capabilities on our own or in partnerships."

In the future, he indicates that Microsoft Office Communication Server and Sharepoint may be targets for Teneros appliances, though partners will figure in the mix. "This round will enable us to proactively invest in strategic partnerships," he says.

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