Green Around the Gills

Casualties are beginning to pile up in the shakeout of the storage networking market. But unlike other boom-and-bust bubbles, this one will create at least one or two noteworthy companies.

The Byte and Switch Top Ten Private Companies list is a snapshot of the firms we think are best positioned to stay the course. Unfortunately, picking the survivors is increasingly coming down to one thing these days: Who has enough cash to ride out the downturn?

The latest example of a startup with strong technology and a solid management team that simply ran out of money is Acirro Inc. Others, like Sanrise Inc., have filed for Chapter 11 bankruptcy protection in the hope of pulling through, while some have scraped together a few pennies from asset sales, as Cereva did (see Acirro Hits Zero, Sanrise Files Chapter 11, and Cereva Sells Out to EMC).

Waiting out this brutal economy in the hope of being acquired is no fun either, particularly when the volume of M&A activity is decreasing (see M&A Slowdown Hurts Startups).

And the carnage is only just beginning. Take a look at the growing number of companies chopping headcounts in order to slow down their burn rate:

Steve Duplessie, senior analyst at Enterprise Storage Group Inc., estimates that of the 225 storage companies his firm tracks today, just 125 will see it through to next year. But Duplessie's figure includes public companies. We estimate that of the 100 or more storage networking startups which have received more than $2.5 billion in funding among them, according to VC firm Charles River Ventures – at best 20 percent of them will make it through to an acquisition or an IPO (or, even less likely, will survive as a standalone company), once the economy recovers (see Startups: The Next Generation