Isilon, PolyServe Pick Up Funding

As conditions for IPOs continue to diminish and wither, VC money is being pumped into markets of promise. For storage this means clustered NAS -- and a sweet $10 million each for Isilon and PolyServe.

Existing investors Sequoia Capital and Madrona Venture Group took part in Isilon's round, with Greylock, Fidelity Ventures, New Enterprise Associates, and The Roda Group providing the backing for PolyServe. The cash influx brings both firms' total funding to around the $70 million mark.

Neither firm formally announced their funding, although the respective deals were revealed in recent regulatory filings with the Securities and Exchange Commission (SEC). For Beaverton, Ore.- based PolyServe, the funding comes almost two years to the day since its $20 million D round led by Fidelity Ventures. (See PolyServe Lands $20M, Talks IPO, PolyServe Pulls in $19.5M, and PolyServe Raises $19.5M.)

At that time, the startup was talking of a possible IPO. PolyServe, which sells a file system for NAS, has instead focused its attention on its partner portfolio, signing deals with HP, EqualLogic, and DataDirect Networks. (See HP OEMs PolyServe Software, PolyServe Debuts iSCSI Support, and DataDirect Bundles PolyServe.)

PolyServe did not respond to Byte and Switch's requests for comment on its Series E round. So, at this stage, it remains unclear what the money will be used for.That said, both NetApp and EMC are cranking up their NAS efforts at the moment, putting competitive pressure on both PolyServe and Isilon. (See EMC Refreshes NAS, SAN.) In June, for example, NetApp finally unveiled its Data Ontap GX operating system for clustered NAS, after almost three years in the development lab. (See NetApp Ships Data Ontap GX and NetApp's GX Targets HPC.)

"As the startups continue to nip at the ankles of the big players, they are going to turn around and apply pressure," says analyst Greg Schulz of StorageIO Group. "If [startups] want to stay in the fight, they have got to ramp up and staff up."

Initially, at least, NetApp's GX OS is available on NetApp's midrange FAS3050 and enterprise FAS6070 arrays. It incorporates global namespace and file stripping, two features that earmark the OS for high-performance computing (HPC) and vertical markets, such as entertainment, oil and gas, and chip design. (See NetApp's GX Targets HPC and NetApp Nudges Closer to New OS.)

Seattle-based Isilon has already made inroads into these markets, and was among the early vendors to sell distributed file systems to industries demanding high throughput. (See Isilon Touts Deals, Isilon Powers Gas Companies, Movielink Deploys Isilon, and NBC Taps Isilon for Olympics.) Earlier this year, prior to NetApp's OS announcement, Isilon rolled out a performance accelerator and a capacity expansion node for its own storage platforms. (See Isilon Taps the Accelerator and Top Ten Private Companies: Spring 2006.)

Jay Wampold, senior director of marketing and communications at Isilon, would not reveal the startup's plans for its cash windfall, although he denied that the Series E was linked with NetApp's re-emergence into the clustered NAS market. "I wouldn't connect the money to competition," he says. "In any market or business there is always competition."It is possible, however, that the Series E will be used to boost Isilon's overseas presence, particularly after the recent launch of the firm's European operation. (See Isilon Opens EMEA Ops.)

All this activity spells good news for users in terms of pricing and support, according to Schulz, although he warns that the market is becoming crowded. "The competition is good, but the confusion is that there are so many options out there."

PolyServe and Isilon's Series E rounds are also evidence of the continuing popularity of NAS technology within the VC community. Last year, despite a downturn in the storage funding market, NAS technology was the most attractive storage sector for VCs. (See NAS-tronomical Year in Funding, BlueArc Pulls In $15M More, Cloverleaf Stakes Fresh Claim, Isilon Lays On $20M Icing, and OnStor OnTap for $24M .)

NAS startup Agami provided evidence that this trend is continuing earlier this week, when it picked up $11 million to help push its next release out the door. (See Agami Plots Upgrade and Agami Gets $11M.)

James Rogers, Senior Editor, Byte and Switch