Chelsio Chalks Up $25M

Chelsio has clinched $25 million in Series E funding as the 10-Gbit/s vendor attempts to snare a raft of new server and storage OEMs.

The round, which brings Chelsio's total funding to $92 million, was led by Investor Growth Capital and included previous investors New Enterprise Associates, Invesco Private Capital, Horizon Ventures, and LSI Logic.

Chelsio has been touting its 10-Gbit/s adapter cards at OEMs since 2004, racking up some 33 customers, according to CEO Kianoosh Naghshineh. "Our product is in the channel, but now it's time to build the front end of our company and our sales and marketing team," he says. "We have a hiring plan in place to recruit very heavily in sales, marketing, and software."

With the Series E round burning a hole in his pocket, the exec expects to add 30 more bodies to Chelsio's 64-strong workforce over the next 12 months in anticipation of more OEM deals. "Fifty companies are in evaluation and 40 more are engaging with us," he says, but he declines to reveal the identities of Chelsio's OEM partners.

Rival vendor Neterion is much more forthcoming about its partnership progress, and has already announced deals for its adapter cards with HP, IBM, and EMC."Chelsio have had no senior sales and marketing staff for some time now, so they really needed to get some brainpower and bandwidth behind their sales and marketing," says Bob Wheeler, senior analyst at the Linley Group.

Long-term, Chelsio is also working on a motherboard-based version of its adapter technology, which it claims will offer InfiniBand and Fibre Channel connectivity on the same fabric.

"We're putting a lot of focus into converged fabric," says Naghshineh, describing plans to offer an ASIC-version of Chelsio's adapter card, which he expects to see on server motherboards by 2009.

"It's sucking in Fibre Channel and InfiniBand and integrating them into the same thing at the same time," adds the CEO, explaining that the ASIC will support both technologies. "You get 10 Gig on your motherboard where you can run InfiniBand or Fibre Channel apps on the same fabric."

The ASIC, like Chelsio's adapter cards, will use remote direct memory access (RDMA), a technique deployed in InfiniBand for bypassing a computer's operating system in passing data from one server to another. RDMA, which is also championed by NetEffect and NetXen, has already been adapted by Chelsio for 10-Gbit/s Ethernet as iWARP -- Internet Wide Area RDMA Protocol.The move into ASIC-based technology will nonetheless present additional challenges to Chelsio, according to Linley Group's Wheeler. "Clearly, in the longer-term, you have to worry about companies like Broadcom dominating the volume LAN on motherboard opportunities," he says.

In addition to rolling out the ASIC technology, Naghshineh tells Byte and Switch that Chelsio also needs the funding boost to allay any potential partner concerns over the coming years.

"Once customers see a big round like this, they know that Chelsio will be a long-term player," he says, admitting that it has taken some time for the 10-Gbit/s market to emerge.

"We started this in 2001 and the market for 10-Gig was a little bit further out then people expected," he explains. "iSCSI and RDMA iWARP needed to come of age and switch port prices needed to drop."

Despite the slowly evolving market for 10-Gbit/s Ethernet, the CEO predicts that Chelsio will reach a major milestone sometime during the next 12 months. "We're going to be profitable this year," he claims.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.