"There are so many new investors interested in storage without thinking why they're interested, says Duncan McCallum, a partner with OneLiberty Ventures, a VC firm that's already well established in this sector (see VCs: Who's Hot?). You're getting a lot of me-too companies funded now.
So what lies ahead for sectors that are bursting at the seams with startups?
There will be a high level of failure for startups as well as customer confusion, says McCallum, although it wont have a large impact on companies that deliver true innovation and value, as customers are still in tremendous pain and have plenty of dollars for storage."
Its healthy but chaotic out there today," says one Silicon Valley VC whos invested in three storage companies (and requested anonymity). But if many more get funded the shakeout will be painful.
Rodney Schrock, former CEO of AltaVista, now president and CEO of storage startup Panasas, says, There are so many VCs out there now offering funding who simply want a storage investment in their portfolio, and this is a dangerous offer to go for.