The Billion-Dollar Slump

The Billion-Dollar Slump Think VC funding has dried up? Storage startups received more than $1 billion in the past 12 months

September 3, 2003

3 Min Read
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Think the venture capital funding environment has hit rock bottom? Storage networking startups raised about $1.12 billion in the 12-month period from July 2002 to June 2003, according to Byte and Switch Insider's August report.

That's a noticeable decline over the preceding one-year period: The report conservatively estimates that venture capital funding of storage networking companies has dropped at least 50 percent year over year. But the report also shows that storage networking continues to be a vibrant sector, especially compared with other tech categories.

The latest edition of Byte and Switch Insider analyzes 97 specific funding rounds from Q3 2002 through Q2 2003 for 87 companies that fall into the storage networking universe. (Ten companies received two financing rounds each in the report period.) The data was compiled using Byte and Switch's own research in conjunction with the MoneyTree Survey, a venture capital tracking service that is a collaboration of PricewaterhouseCoopers, Thomson Venture Economics, and National Venture Capital Association.

The report, researched and written by technology industry analyst Graeme Thickins, identifies which segments of the storage networking market are hot and which have been overfunded. It also details which VC firms were the most active over the period surveyed -- naming winners and losers -- and covers the outlook for venture funding in the year ahead.

Of the $1.12 billion overall total, the majority (61 percent) went to hardware startups. Here's the breakdown by category of the funding raised by the 87 companies surveyed in the report:Table 1: VC Funding by Category (3Q02 - 2Q03)


No. of Cos.

Total Funding


Category Description





Storage arrays, storage networking switches, storage security appliances, RAID controllers, InfiniBand switches





Backup and recovery, data replication, storage resource management (SRM), virtualization, file caching, archiving, global file systems





Storage processors, TCP Offload Engines (TOEs), network components





Storage service providers (SSPs), storage networking consulting

Other highlights from the August report:

  • Follow-on rounds represented the vast majority of funding, with the report identifying only seven early-stage startups as having received first-round funding in the period surveyed.

  • At least $670 million in total VC investment was flushed down the drain after several well-funded storage startups shut their doors over the course of the past year.

Todd Spangler, US Editor, Byte and Switch

The current Byte and Switch Insider report -- Venture Capital Survey -- is available here

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