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Storage Startups Surge

Funding for data storage startups more than tripled between the first and second quarters of this year, and more than twice as many data storage startups were funded, according to the latest research from Ernst & Young and VentureOne.

The research shows that $49.5 million invested in the first quarter soared to $175.2 million in the most recent one. That money was distributed among five deals in the first quarter and 12 in the second.

But doff the rose-colored shades: The first half of 2005 saw $225 million invested in data storage by venture firms, compared with $235 million in the first half of 2004, the firms say.

Still, the market likes storage startups. Despite restrictive budgets, customers are keen to improve the efficiency and useability of stored data (see IT M&A Is Down, Report Says and Survey: Storage Spending Will Slow). Some are using compliance mandates as a way to invest in the technology they require. All this results in ongoing investor interest.

There is clear evidence right here on Byte and Switch of robust storage investment this year. Though it's too soon to tell how the figures will compare with 2004, by our reckoning, storage startups have racked up more than $350 million so far (see the table below). Investment appears to be on track to meet or exceed the $500 million revealed in announcements on Byte and Switch at the end of 2004 (see Storage Startups Top $500M and Startups Score in Funding Uptick).

The following table was culled from announcements we've published so far in 2005.

Table 1: Startup Funding 1H2005

Company Description Latest round Date announced Round Total funding
Aresenal Digital Solutions Storage services $15 million February-05 N/A $101 million
BlueArc Corp. Next-gen NAS $15 million May-05 N/A $175 million
Bocada Inc. Backup software $9.5 million January-05 3rd $20 million
Cloverleaf Communications Inc. Virtualization appliance $11 million June-05 3rd $36 million
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