Backup Service Providers Swell

Startups in this segment have raised $49.5M so far this year, and competition is now heating up

June 17, 2003

3 Min Read
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Online backup service providers are on a roll: As AmeriVault announced a small round of funding today, competitor LiveVault Corp. said it's the first company in this space to support Microsoft Corp.'s (Nasdaq: MSFT) Windows Server 2003 (see AmeriVault Pockets $1M Funding and LiveVault Recovers Win2003).

First AmeriVault, based in Waltham, Mass., announced today that it has received a staggering $1 million in funding. The pocket change comes from the startups only current investor, Boston-based Alta Communications, which has already handed over $6 million to the company.

"They continue to make good progress and continue to grow," says Lane MacDonald, a general partner at Alta. "We’re just happy to support them... They don’t need any more funding beyond this capital."

Although $1 million may not be the most impressive sum, AmeriVault, which was founded in 1998, is in one of the only categories of storage companies that are getting any funding at all these days: online backup service providers. Since the beginning of 2003, AmeriVault, Arsenal Digital Solutions Worldwide Inc., EVault Inc., LiveVault, and ManagedStorage International Inc. (MSI) have raised a combined total of $49.5 million (see Arsenal Restocks Its Coffers, Startups Tap VC Reserves, LiveVault Locks in $10M Series B, EVault Raises $6M Series C, and MSI Springs on $22M).

AmeriVault, which has about 350 customers, claims it’s already cash-flow positive and only needs the additional cash to help it launch new replication and high-availability services by the end of this year. "This fully funds our business plan," says AmeriVault CFO Brian Jacobson. The company has no immediate plans to add to its headcount of 30 employees, he says.While some of the new cash will go to enhance sales and marketing, Jacobson says that most of it will go to new software and hardware investments. AmeriVault uses software licensed from EVault to capture and recognize block-level changes made to files at the customer site. It then encrypts and compresses that data before it transmits it over the public Internet or a private IP line to secure, offsite, mass storage systems. AmeriVault says it buys all of its hardware from EMC Corp. (NYSE: EMC).

As more small and medium-sized companies start shopping for offsite disaster recovery plans, companies like AmeriVault and LiveVault have been gaining traction and attracting investors.

"Backup is one of the most tedious tasks to do in IT, but also one of the most crucial ones," says Robert Cramer, LiveVault's president and CEO. "Companies may as well hand it off to a professional."

Of course, there's a bit of sibling rivalry within the 'Vault family. LiveVault, for instance, claims that it's currently the only company that guarantees complete data protection for Windows Server 2003. The startup, which has received $20 million in funding to date, says that the Microsoft server is the platform of choice among most of its approximately 500 customers.

Cramer insists that LiveVault's approach to IP backup services will remain the most attractive. While AmeriVault offers only block-based delta backup, he says, LiveVault allows companies to choose between that and continuous backup of every byte that is changed. "A significant majority of our customers opt for continuous protection," he says.AmeriVault CEO Budd Stoddard, for his part, insists that LiveVault's continuous backup service is expensive and detracts from the customer’s bandwidth during the day. Cramer, meanwhile, counters with the claim that 95 percent of LiveVault customers don’t purchase additional backup.

Squabbles aside, most of the players in the growing backup service provider space claim their main competition doesn’t come from each other, but from traditional in-house tape backup, as well as the physical transport of that tape to disaster recovery sites like Iron Mountain Inc.

"Sending data over the Internet isn’t as scary as people used to think," Stoddard says. "Really, it’s more secure than putting it in a truck and driving around Manhattan."

— Eugénie Larson, Reporter, Byte and Switch

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