Silver Peak Pockets $17M

Silver Peak Systems, a startup swimming in a sea of bigger WAN accelerator competitors, picked up $17 million in funding today. (See Silver Peak Raises $17M.)

Silver Peak's second funding round in a year -- and third overall -- brings its total to $42 million, as it tries to cash in on large firms' desire to improve application performance in branch offices. (See Silver Peak Secures $13M.)

The WAN acceleration market is growing fast, but Silver Peak could be running out of time to catch the wave. (See Insider: Trio Takes DR to Next Level.) The startup competes with public companies Blue Coat, Cisco, Citrix, F5 Networks, Juniper, Packeteer, Riverbed, as well as Expand Networks and a host of smaller vendors.

Analyst Joe Skorupa of Gartner Group says Silver Peak's WAN acceleration platform still lacks an affordable branch office product. Skorupa says Silver Peak's high throughput capabilities have won it customers for replicating data between data centers, but it is too expensive for large companies with many remote offices. Silver Peak's remote office device costs around $10,000, which is three or four times the price of some of its competitors.

"They don't have a good solution for the branch office," Skorupa says of Silver Peak. "You need to be at around $2,500 for a strong branch office product. "If you're going to consolidate 300 branches, a few thousand dollars [per box] means a lot. Silver Peak's focus has been where high throughput matters and average selling price is less of an issue because you only need a couple of boxes."Skorupa says the big money in WAN acceleration is in selling to companies with many branches. Riverbed went from startup to successful public company in a few years by targeting those customers, while Silver Peak was tweaking its product. (See Riverbed Flows Toward Breakeven.) Silver Peak launched its first device in late 2005, and then last October came out with a new high-end NX 8500 device. (See Silver Peak Enters WAN Arena and Silver Peak.)

Silver Peak was tight-lipped about its plans for the funding. Marketing VP Craig Stouffer said he couldn't give many details. "I can say that this round combined with our current cash is intended to be our last financing and should take the company through cash flow positive." Stouffer says Silver Peak has about 100 customers.

Skorupa says Silver Peak's replication capabilities can bring in revenue, but the startup needs to develop an entry-level box quickly or hope a larger company will acquire Silver Peak or partner with it for its technology.

The WAFS and WAN acceleration space has been rife with deals over the past few years. Cisco, Citrix, F5, and Juniper all got into the market through acquisitions. (See Cisco Joins WAN/WAFS in Name Only, Cisco Wades Into WAFS, Citrix Grabs Orbital Data, and Juniper Takes Peribit, Redline.) Packeteer added to its product family by acquiring Tacit Networks and has partnerships with Brocade and Microsoft. (See Brocade & Packeteer Widen Target and Packeteer Picks Tacit.) Citrix also has a deal with Microsoft. Skorupa says he wouldn't be surprised to see one or more of those large companies move to acquire more WAN acceleration technology.

A handful of VCs are banking on Silver Peak becoming profitable or finding a suitor. New investor Artis Capital Management led Silver Peak's latest round, with previous investors Benchmark Capital, Duff Ackerman, Goodrich LLC, Greylock Partners, and Pinnacle Ventures kicking in more.Dave Raffo, News Editor, Byte and Switch