Isilon Lays On $20M Icing

Isilon Systems today announced its fourth, and what execs hope will be its final, round of funding -- $20 million in venture capital involving all existing investors and one new one.

Isilon's "icing" round will go to more R&D and to building the channel, an effort that's already underway with new distributors signed on in Japan and Korea and planned partnerships in China and Europe (see Isilon Expands Sales Channel).

CEO Steve Goldman won't set a profitability date, but he hopes this will be the company's last trip to the VC well: "We view this as the round of capital that gets us to self-sufficiency." Since its 2001 founding, Seattle-based Isilon has already sunk $59.9 million into cultivating specific types of content-laden customers for its Isilon IQ system.

Like a growing roster of young NAS companies ("startups" is a misnomer at this point), Isilon takes aim at key weaknesses of NAS systems from big players like EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP). (See NAS Deals Fall Short.)

In contrast with systems from those suppliers, the Isilon IQ allows data volumes to span multiple physical devices while maintaining a single namespace. It holds file systems up to 168 Tbytes and includes replication, load balancing, and optional InfiniBand links between systems (see Isilon Embraces InfiniBand).Isilon has used these features as its battle cry in obsessive pursuit of vertical customers looking for scaleable NAS. While not giving specifics, the company claims to have doubled its roster of media and entertainment, digital imaging, life sciences, oil and gas, and government customers in the last six months (see Isilon Scores Super Bowl Storage, Isilon's Focused on Feds, and Lights, Camera... NAS!). In support of this, Isilon said in December 2004 that it had shipped roughly 1,000 Tbytes (1 petabyte) of storage (see Top Ten Private Companies: Winter 2004, page 8). The company, which has 130 employees, now claims to have shipped 2 Pbytes.

Isilon's not alone in eyeing the burgeoning rich-content market. Competitors BlueArc Corp., Exanet Inc., ONStor Inc., Panasas Inc., and Xiotech Corp. also pursue verticals hungry for digital content NAS. At least two, BlueArc and ONStor, also are rumored to have new funding (see BlueArc Branches Out). ONStor is said to be on the verge of a round equal to or larger than Isilon's.

Steve Goldman acknowledges the growing market. "What we have in front of us is creating a new category of storage," he asserts. "There's an enormous opportunity for intelligent, clustered storage for digital content." And he's not put off by rivals: "We think we probably have a three-year headstart in an area where there is really heavy lifting."

Isilon will need every advantage in what looks to be a coming shakeout. Increased clamor around new NAS gear is pressuring the late-stage newcomers into surviving with gusto, or falling by the wayside. These aren't cheap companies to build or maintain, and most of the innovators are at a stage when investors are eager for a payout.

Regarding IPO, Goldman won't be drawn. "We see it as a milestone along the road," he says. But it's too soon for questions of when or how.Isilon's round was led by Focus Ventures, a new investor. All existing investors also participated, including Atlas Venture, Lehman Brothers Venture Partners, Madrona Venture Group LLC, and Sequoia Capital.

Mary Jander, Site Editor, Byte and Switch