FilesX, Actona Find Funds

The market may still be marching in place, but for two Israeli storage startups at least, life this week is good. Both file-caching vendor Actona Technologies Inc. and data recovery software player FilesX Inc. have announced new rounds of funding (see Actona Raises $11M Round Two and FilesX Wins $7.5M Funding).

FilesX, which is planning to start shipping its rapid data recovery software at the end of this quarter, announced today that it has received a second round of funding worth $7.5 million. The round brings the company's total financing to $11.5 million. New investor Benchmark Capital led the round, joined by another newcomer, Index Ventures, and the company's initial investor, Genesis Partners (see FilesX Founder Counts Blessings).

While $7.5 million may not sound like a lot of money, FilesX president and CEO Jacob Herbst says he's hopeful that the money will last for a long time. In fact, he expects it to keep the company going for the next two years, at which time, he says, the Southborough, Mass.-based startup should reach profitability. "I'm an 'old economy' guy," he says. "I'm going to keep that money under my boot." [Ed. note: Clearly, the "old economy" he is referring to is that of the antebellum South.]

Gartner Inc. analyst Ray Paquet says it's hard to know how long funding will tide a startup over but says that the smaller rounds are often the smarter ones. "I'm not impressed by people taking in lots of money," he says. Especially today, when almost every round is a down round, large chunks of change just mean that more of the company will go to the investors, he says. FilesX says its latest round was "slightly down."

In any case, the company's technology seems to hit an underserved area of the market. The startup says its initial product, Xpress Restore, provides an easy way to restore volumes, files, and application data, such as email messages in Microsoft Corp. (Nasdaq: MSFT) Exchange, in a heterogeneous storage environment. While there are other startups, including Revivio Inc. (formerly Mariko Systems) and Vyant Technologies Inc., working on the same type of technology, analysts say FilesX won't run into much competition at first (see Vyant Raises $3M Inside Round and Who's Gobbling More Cash?)."It's a way-cool concept," burbles Steve Duplessie, senior analyst at Enterprise Storage Group Inc., who says FilesX's strategy of going after Exchange is a good idea. "It's good because everybody has it, and everybody has problems with it."

Gartner's Paquet concurs but points out that the company has no references yet, so it's impossible to know if the technology actually works: "It's great if the thing works and they're able to sell it... but that's a big if."

FilesX says eight beta customers have been testing the product for the past six months, although some of these are in "more academic" environments (i.e., nonpaying customers).

The startup says the new investment will mainly go to marketing and sales efforts. The company currently has 25 employees, based in either Massachusetts or Israel, about 18 of whom are working on research and development, Herbst says.

Meanwhile, another Israeli startup, Actona, is planning to use its additional financing to launch the third version of its file-caching software. The company, which has been shipping its distributed file system since the end of 2001, said yesterday that it has added another $4 million to its Series B funding round, bringing the round to $11 million in all. The company closed the first portion of the round in March 2002; investors include Sequoia Capital, Evergreen Venture Capital, and Fantine Group.Formerly known as VersEdge Technologies, Actona says its software enables users to read and write to remote NFS and CIFS file servers as if they were on a LAN (see Startups Change Their Tunes). Actona has several customers for the first generation of its software, including Cadence Design Systems Inc. and Redback Networks Inc. (Nasdaq: RBAK). It also says it has a handful of companies beta testing the new 2.0 version, which it expects to launch in a couple of months.

"The financing will last us well into next year," says David Faugno, VP of finance and operations at Actona. Most of the money will go to sales and marketing, but there will be some growth in R&D as well, he says. Approximately two thirds of the company's 40 employees are engineers. Actona is based in Los Gatos, Calif., with offices in Haifa, Israel.

Eugénie Larson, Reporter, Byte and Switch