ATA Is Where It's AT

'Tis the season for startups to wrap up funding rounds before the close of the year, and ATA (advanced technology attachment) vendors are finding investors in a giving mood.

Nexsan Technologies, which sells a series of RAID arrays, and ATA-based backup and recovery appliance startup Data Domaineach unwrapped $17 million in funding this week. Both have significant expansion plans in 2004 in the expectation that more backups will be done on disk and fewer on tape.

Disk backup and fast restore is where everybody’s going now,” Data Domain CEO Frank Slootman says. “The trend is to ATA storage, and we’re right in the middle of that.”

Diamond Luaffin, Nexsan’s senior executive VP, has been pushing disk-to-disk backup at the expense of tape since 2001. The Woodland Hills, Calif.-based company began shipping ATA backup products in 2001 along with Fibre Channel and SCSI product. By mid-2002, it dropped Fibre Channel and SCSI and turned full-time to ATA. Its RAID arrays are aptly named ATABeast, ATABaby, and ATATwins.

“We came from the world of tape,” says Luaffin, who previously worked at Qualstar Corp. (Nasdaq: QBAK). “We saw a desire from our customers to go to disk-based backup. ATA made that affordable and practical.”Lauffin says Nexsan turned a profit this year but pursued this second round of funding to support its expansion. The round was led by VantagePoint Venture Partners. Nexsan’s only previous funding came from private investors. This round will likely be its only through venture capital firms.

“An IPO or merger may be in store for the end of 2004, but I don’t have a crystal ball,” Lauffin says.

Lauffin says Nexsan is approaching 100 employees, and he expects to more than double his engineering group to 25 and triple his sales staff to 15 by the end of 2004. Most of Nexsan’s sales go through vertical OEMs and systems integrators, and its customers are global 50 and Fortune 500 companies. Nexsan will probably announce new product in the first quarter of 2004 (see Nexsan Unleashes Beast and Nexsan Delivers Twins).

Data Domain’s Series B funding brings its total raised to $26 million. Slootman says that should take the Palo Alto, Calif.-based company through to profitability. “If there’s another round, it’ll most likely be an IPO,” Slootman says.

That won’t happen until 2005 at the earliest, though. In 2004, Slootman expects upgrades to his company’s DD2000 recovery appliance and backup-and-restore software as well as a new product line (see Data Domain Gets Compressed).Slootman says Data Domain picked up more than a dozen customers since the fall for its first products. “We see that doubling every couple of months going forward.”

He also sees his company’s headcount doubling from 32 to 64 over the next year. Most of the expansion will come in sales and marketing. Data Domain, which sells through a reseller channel, will add salespeople in New York, Boston, and Europe.

Sutter Hill Ventures led Data Domain’s funding round.

Even with the new money going to ATA, tape still has a place in the world of backups. Advanced Digital Information Corp. (Nasdaq: ADIC) recorded record fourth-quarter and 2003 total sales with its tape libraries, and today announced its first integrated disk-to-tape system (see ADIC: Tape's No Rerun).

— Dave Raffo, Senior Editor, Byte and Switch