Questioning a Storage Icon

Not long ago, Byte and Switch profiled Barbara Nelson, CEO of storage encryption player NeoScale Systems, as one of the industry's Top Women In Storage.

Last week, NeoScale's demise was reported at length by sister CMP publication CRN, and our follow-up reporting reveals a sad story of corporate failure, capped by a fire sale.

Among the most distressing reports about NeoScale are those of employees being released without final expense reimbursement, distribution partners left hanging without information, and creditors lining up to scavenge the premises.

And the endgame -- the $1.95 million assets-only sale of a company funded with over $40 million -- is a jarring reminder of the dangers that await unprepared or mismanaged startups.

Bottom line? The information about what went wrong at NeoScale paints a sorry picture of its executive team, leading us to question our choice of Nelson in the Top Women listing.To be clear, though: Our October 2007 report on Nelson was based not only on NeoScale's traction as a company, but on her past record of executive leadership at Intel and Quantum, among other firms. We stand by that information.

Indeed, there was a lot of success at NeoScale. The firm had nearly 300 customers, was adept at acquiring channel partners, made EMC's coveted Select list of storage-related products, and had by all accounts a solid technology story.

What's more, Barbara Nelson wasn't alone at the top of the NeoScale heap. There were plenty of investors on the board, including Barry Eggars of Lightspeed Venture Partners, Wes Raffel from ATV, Charlie Smith from CHS Ventures, and Atul Kapadia of Bay Partners.

In fact, that was the board -- Nelson and the investors. Was there an imbalance there?

We may never know to what extent Nelson and other execs at NeoScale were held hostage by their creditors once the funding ran dry. It wouldn't be the first time a startup failed in the wake of pressure from its owners.Bottom line? We've decided to keep Barbara Nelson on our list. Sure, NeoScale's failure isn't an accolade for her. But in any startup's demise, there's usually enough culpability to go around. And in this case, there was evidence of competence as well as short-sightedness. It's impossible to lay the blame squarely on anyone's shoulders.

Ultimately, the sad demise of NeoScale isn't about Barbara Nelson or any of the firm's execs. It's yet another cautionary tale about the multiple risks involved in starting up a business in the enterprise market.

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