3ware Hits Reset Button

3ware Inc., after an ill-fated run at IP storage, has netted $26 million in venture funding to fuel a restart of the company geared around the Serial ATA controller market.

The funding -- a Series A1 "refunding" round -- was led by U.S. Venture Partners; other investors included New Enterprise Associates (NEA), VantagePoint Venture Partners, and Selby Venture Partners. 3ware had previously raised $57 million in four rounds from investors including NEA, Selby, and VantagePoint (see 3ware Lands $26M Funding).

Two years ago, 3ware launched Palisade, a family of IP storage subsystems, around which the company was pinning much of its future growth prospects (see 3ware Launches Palisade IP Storage and 3ware Loses Its Head).

Alas, that strategy bombed. Last year 3ware scrapped its IP storage business entirely to refocus its efforts on the RAID controller market. To date, 3ware's primary revenue stream has been from its parallel ATA controllers, but the company now sees a gigantic opportunity to get Serial ATA, says Faye Pairman, who was brought on as CEO of 3ware in August 2002.

Initially, 3ware will be targeting secondary enterprise storage applications with its Serial ATA controllers, she says. "There are a lot of applications that will still need SCSI and Fibre Channel, and we'll compete there eventually, once Serial ATA gets its sea legs," says Pairman. "But there's a whole market for storage that is accessed irregularly. Serial ATA provides a much more cost-effective way to store that data."Serial ATA, which is intended to provide high reliability and performance features similar to more expensive SCSI and Fibre Channel drives, is expected to ramp quickly in the next few years. IDC forecasts that by 2006, Serial ATA will represent nearly half of all enterprise disk drives shipped. This week Western Digital Corp. (NYSE: WDC) introduced the 36-GByte Raptor, which the company claims is the first "enterprise-class" Serial ATA drive (see Western Digital Hatches Raptor).

But is 3ware just chasing the flavor of the month? No, says Pairman: Unlike its attempt to deliver IP storage systems -- well before the iSCSI specification was even close to being completed -- there's much more momentum behind Serial ATA.

"There's a real wave we're riding instead of having to swim upstream," she says. [Ed. note: thereby winning Byte and Switch's award for best mixed metaphor of the week!]

Of course, Serial ATA in the enterprise space has yet to take hold. And even once it does, 3ware will have to go toe-to-toe with larger, more established players, including Intel Corp. (Nasdaq: INTC), Adaptec Inc. (Nasdaq: ADPT), and Marvell Technology Group Ltd. (Nasdaq: MRVL).

But 3ware has already accumulated a lot of valuable intellectual property and expertise in this area, Pairman says. "If you've been in the RAID business, you know there's value in the technology," she says. "Having been around for five years gives us a huge lead." The "3" part of 3ware, by the way, is derived from hardware, firmware, and software -- each of which must be tightly integrated in a RAID controller.Pairman, whose first order of business was to raise the additional funding, joined 3ware after a two-year stint as CEO of startup Redline Networks Inc.