SiliconStor Socks Away $9M

SiliconStor Inc. has parlayed its first-generation SATA multiplexer chip into a $9 million funding round, which it plans to use to expand its battle on the SAS front. The question is, will there be a market to make the foray worthwhile?

SiliconStor will officially announce its first venture funding round tomorrow, led by VSP Capital with participation from APV Technology Partners. The Fremont, Calif.-based startup raised $3 million in seed money in 2002.

Last November, SiliconStor won an OEM deal with SAN array manufacturer Dot Hill Systems Corp. (Nasdaq: HILL) for an active-active multiplexer -- a chip that makes single-port SATA drives look like dual-port drives, doubling bandwidth (see SiliconStor Signs On for SATA ). Active-active multiplexers make both ports available, similar to Fibre Channel drives. Other SATA multiplexers are active-passive, with only one host port connected to the storage drives.

SiliconStor also has a second-generation product sampling with OEMs that supports 3-Gbits/s bandwidth, Native Command Queuing (NCQ), and other new SATA features (see Souping Up SATA). SiliconStor claims 15 design wins for this product.

SiliconStor expects the competition for OEM deals to heat up when it launches its third-generation multiplexer with SAS support. There’s likely to be a battle in the third generation,” SiliconStor marketing VP Joel Warford says of active-active competition.If no competition steps up, however, the startup could find itself alone in a limited niche. PMC-Sierra Inc. (Nasdaq: PMCS)and Vitesse Semiconductor Corp. (Nasdaq: VTSS) still ship active/passive multiplexers.

One SATA pioneer has his own theory. “I guess it’s good to be in a market where no one else is; but if no one else does it, you want to ask, ‘Why is no one else doing it?’ ” asks J. Peter Herz, founder of SATA controller startup 3Ware, which Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) bought for $150 million a year ago (see AMCC Buys More Storage).

Herz, who left AMCC after the sale, speculates the market isn’t big enough. While active-active helps performance, it's a feature associated with higher-end storage. SATA is predominantly aimed at the low-cost storage market. “Storage is getting so cheap that high-end features aren’t needed,” Herz says. “If it breaks, you just replace it.”

That doesn’t mean SiliconStor is doomed. It seems likely to score sufficient wins to survive in the short term, and as a small startup with little overhead, it doesn’t require the volume that the bigger companies would. If the larger chip makers decide down the road to embrace active-active SATA and SAS multiplexer chips, SiliconStor could be an acquisition target. It also could eventually expand beyond multiplexer chips.

In any case, SiliconStor hasn't given away too many details. When the company announced its Dot Hill deal last November, CEO Mike Ofstedahl wouldn’t reveal how big the company was or how much funding it had.Now, SiliconStor VP Warford says the company has 25 people with plans to grow to 40 this year, and most of the additions will be engineers. The startup also has several new executives with ties to Ofstedahl from his days as VP of OEM sales at Adaptec Inc. (Nasdaq: ADPT). They include sales VP Mark Egerton, engineering VP James Lie, and Warford. Another Adaptec vet, John Hamm of VSP Capital, joins the board.

— Dave Raffo, Senior Editor, Byte and Switch