BlueArc Wallows in $47M Haul

NAS vendor BlueArc Corp. has tucked away a staggering $47 million round of new funding -- a truly lavish pile of loot that comes at a time when other storage startups are scrimping to get by (see BlueArc Inhales $47M in Funding).

The funding, which brings BlueArc to a total of $157 million raised since it was founded in 1998, came primarily from three new investors: Meritech Capital Partners, which led the round, Crosslink Capital, and RWI Group.

"These are real strong VCs," says Jeff Allen, BlueArc's senior VP of marketing. "We're not just going back to our existing investor base."

Previous investors include Apax Partners, Celtic House Venture Partners, Dell Computer Corp. (Nasdaq: DELL), myQube Venture Capital GmbH, and Weston Presidio Capital. BlueArc received its last major round of funding, $72 million, in May 2001 (see BlueArc Wins $72M Round).

BlueArc's latest funding is the biggest round of VC backing raised by a storage startup since now-defunct high-end NAS player Zambeel [ed. note: bad omen alert!] picked up $52.6 million in November 2001 (see Zambeel Lands $52.6M and Zambeel Znuffed Out). Stealth-mode NAS startup Pillar Data Systems supposedly has received around $100 million from Oracle Corp. (Nasdaq: ORCL) CEO Larry Ellison, but Pillar has never officially confirmed the amount (see Larry's Stealth Storage Startup).However, the company's round also illustrates that the climate for tech IPOs continues to be dismal. Rather than trying to raise money through the public markets, as BlueArc considered at one point, it opted to raise more private equity.

Allen says the funding will last well through the company's break-even point and into profitability [ed. note: after five years and $157 million, we should hope so], which he says the company expects will happen sometime next year.

BlueArc will use the new funding primarily to expand its sales and marketing operations, according to Allen. Currently, the company has about 22 salespeople; it has a total of around 200 employees. "We need more feet out there," Allen says. "We want to add more coverage so we can basically get more sales." He contends the engineering team has been delivering "like clockwork."

As has been the case since BlueArc first stepped into the storage snake pit, its two main competitors are EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP), which continue to dominate the high-end NAS market.

Bit by bit, though, the San Jose, Calif., company appears to be starting to carve out a sustainable customer base. In the most recent quarter, BlueArc claims it boosted revenues 57 percent over the second quarter of 2002 and upped its customer roster by 20 percent. Of course, BlueArc doesn't disclose sales figures, so this doesn't mean very much by itself. [Ed. note: After all, 57 percent more than diddly squat is still pretty much diddly squat.]And, whereas BlueArc's previous customers have been concentrated in scientific computing, its latest wins include organizations in other vertical industry segments. In the second quarter, the company says, new customers included:

Moreover, BlueArc says several existing customers purchased additional storage, including Altera Corp. (Nasdaq: ALTR), Everyones Internet, NASA's Jet Propulsion Laboratory (JPL), Lawrence Livermore National Laboratory (LLNL), and Oxford Magnet Technology Ltd.

Allen says BlueArc's introduction of lower-priced ATA-based disk options in April helped "open a lot more doors" to prospective customers. The company's Multi-Tiered Storage (MTS) program allows users to mix and match ATA drives along with more expensive Fibre Channel disks in a single BlueArc system (see BlueArc Gets Cheap).

— Todd Spangler, US Editor, Byte and Switch