Compellent Corrals $15M

Compellent Technologies Inc. picked up $15 million in funding today, which execs hope will help it to a permanent place in an expanding midrange market (see Compellent Gets $15M).

The round brings Compellent's total funding to $38 million. CEO Phil Soran hopes that will be enough to take the Minneapolis-based startup to profitability. He says the 65-person company might hire a few extra hands, but the funding will mostly go toward expanding its channel.

We might need a mezzanine round, but I hope not,” Soran says. “This will help fund our distribution expansion. We’ll recruit partners who will hopefully take us to cashflow profitability in the not too distant future.”

Compellent sells its Storage Center systems exclusively through its 60-odd channel partners, and Soran claims more than 120 customers since the company's February 2004 launch (see Compellent Comes Out Selling). Compellent expanded into Europe by opening an office in Amsterdam last week, and Soran says it will look to sign channel partners in U.S. cities where it currently has no presence (see Compellent Opens Euro Partner Program).

Compellent won high marks for its technology when it came out with its open platform that allows companies to mix and match Fibre Channel, iSCSI, and SATA drives, controllers, and enclosures. Compellent also offers mirroring, replication, resource, and storage management software.But Compellent has plenty of company in the midrange market, which is expanding both in revenue and competitive intensity. Falling prices and rapid adoption of new technology such as SATA and iSCSI have brought new competitors into the space (see SAN Sales Thick in the Middle, Report: Storage Market to Grow by 35% , and Midrange Makes Its Move).

Analyst Curtis Gittens of market research firm Info-Tech Research Group says Compellent needs to raise its profile.

“Their technology is sound, and with $15 million they have the potential to make headway,” Gittens says. “Now they have to let people know who Compellent is. When you have heavy hitters like EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP), it’s hard for startups to gain market share. They have to build mindshare and comfort level among customers.”

Soran says Compellent most frequently runs into Dell Inc. (Nasdaq: DELL) and EMC when trying to land customers, and both of those vendors are gobbling up market share with the midrange Clariion systems they co-brand (see EMC Growth Continues and Dell Storage Soars).

There's more. Besides battling the major Fibre Channel players, Compellent needs to keep from getting lost in the iSCSI shuffle among IP SAN specialists EqualLogic Inc., LeftHand Networks Inc., Intransa Inc., and StoneFly Networks Inc. (see Startups Look to iSCSI Surge).But Compellent’s customers are often first-time SAN users unimpressed by big names. After originally targeting small enterprises, Compellent has started making inroads in the small-business "SMB" market that storage vendors are touting (see Small Firm Counts SAN Success).

Centennial Ventures led the round, and Centennial principal Neel Sarkar joins the Compellent board of directors. Compellent’s previous investors Cargill Ventures, Crescendo Ventures, and El Dorado Ventures

also participated in the round (see Compellent Lands $14M and XIOtech Founders Back in Business).

— Dave Raffo, Senior Editor, Byte and Switch