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Santa's Early for SAN Startups

This month alone, over $130M in VC funding has been poured into new startups targeting the SAN market

How's this for holiday cheer: Within the last month, almost $130 million has been invested in technology startups targeting the storage networking sector. Thats on top of the $2.4 billion already invested in over one hundred companies now jostling for position in this marketplace (see Venture Capital Survey).

Have the VCs lost the plot completely? Or are there still sectors of this market that are worth sinking more investment into?

Table 1: SAN startups funded - 11/20/01 - 12/20/01

CompanyMarket sectorAmount funded Date
Aristos LogicSAN processors$15.5m12/19/2001
ExanetClustering software $17m12/4/2001
Lane15InfiniBand software$12m12/11/2001
Maranti SAN switch$25m12/14/2001
NextGigSAN processors$15m11/23/2001
NishanIP SAN router$10m credit line12/12/2001
StorigenSAN cache$15m 12/12/2001
Z-forceSAN switch$16m12/13/2001
Total Funding:  $125.5m 

”Where there is significant customer pain, that’s where the investment should go. [That pain] is still very evident in storage,” says Jo Tango, a VC at Highland Capital Partners.

However, he notes that there is a “major disconnect” between the types of companies the VCs and entrepreneurs are creating and what end users will actually buy. “Customers tell us that much of what is being developed today they won’t need for several years.” Case in point: 10-Gbit/s iSCSI chips, he says (see Siliquent Secures $10M for 10-Gig Silicon ).

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