Scale8 Flatlines

Distributed NAS startup Scale8 Inc. has officially shut its doors after it failed to find a buyer for its intellectual property, Byte and Switch has learned.

Scale8 last month cut back its headcount and was trying to sell off its assets (see Scale8 Scales Down).

But it didn't find any takers. On Friday, May 30, the San Francisco company started to wind down its operations. "Josh [Coates, founder and CTO] says that he is dusting off computers and just closing the doors with a skeleton crew," says a source familiar with the company. [Ed. note: Dusting?]

Company executives did not respond to email messages. When we called Scale8's main phone number, someone who identified himself as Craig answered. After learning he was speaking with a Byte and Switch reporter, Craig snapped: "Didn't you already write that story? Well, you have sources -- call them." We must have caught "Craig" (if that's his real name) mid-dusting...

In all, Scale8 burned through a total of $55 million in funding, most recently with a $23 million third round in August 2001. Its investors included Oak Investment Partners, Star Ventures, InterWest Partners, CenterPoint Ventures, and Crown Advisors (see Scale Eight Scores $23M).Founded in 1999, the company was originally a storage service provider (SSP) that proposed to host vast quantities of data for media companies, using its distributed file-sharing software. It did land a few big-name clients -- including Microsoft Corp. (Nasdaq: MSFT), which used Scale8 to distribute content for MSN -- but there wasn't enough business in this area to sustain the company.

Last year, Scale8 switched gears and -- presto! -- became a software company, trying to sell distributed file system software. But that didn't work very well either, so it gave it one last shot with a hardware-based NAS appliance that it introduced earlier this year (see Scale Eight Smells the Software and Scale8 Turns to NAS Hardware).

The demise of Scale8 follows that of Zambeel, another distributed NAS startup, which dissolved in mid-April. A team of ex-Zambeelians is now attempting to salvage that company's technology with software company StorAD Inc. Like Zambeel, Scale8 supported only the Network File System (NFS) protocol, the NAS protocol in Unix environments, and not the Common Internet File System (CIFS) protocol, which is used with Windows (see Zambeel Znuffed Out and Zambeelians Reemerge at StorAD).

The fates of Scale8 and Zambeel indicate that there's a limited market today for such high-end distributed NAS systems -- no matter how good their technologies might have been. It didn't help that both were relatively young startups trying to convince customers to migrate critical elements of their infrastructures to a brand-new architecture, instead of offering products that worked with a company's existing storage systems.

Another clue Scale8 was on the slippery slope into oblivion was that it changed its business model strategy three times over the course of its life. A startup with an identity crisis, it would seem, is not long for this world.Todd Spangler, US Editor, Byte and Switch