Troika Takes in $14.4M

Troika Networks Inc. has picked up $14.4 million in funding, as it tries to survive in an intelligent switch market that has seen startups steadily disappear over the years.

Troika has raised a total of $81.4 million, with $27.4 million coming over two rounds since it sold off its HBA business in 2002 and made its move into switches (see JNI Buys Troika's HBA Software).

Troika will announce Thursday that its previous investors have ponied up as the Westlake Village, Calif.-based startup prepares to expand its sales and marketing. Founder and CEO Bill Terrell says Troika's strategy is to beat bigger rivals for customers, then join them as partners.

Terrell says Troika has about two dozen” customers in a market that's still in its infancy. Most of Troika’s sales have come through partnerships with virtualization software vendor StoreAge Networking Technologies Ltd. and storage companies Engenio Information Technologies Inc. and Storage Technology Corp. (StorageTek) (NYSE: STK). (See Engenio Certifies Troika, StoreAge and Troika, StoreAge Join StorageTek Alliance.)

Now Terrell wants to leverage those deals into OEM relationships. “We believe the way to control your own destiny is to take it to market, get customers to vote with their dollars, then use that traction to influence OEMs to work with us,” Terrell says.The storage landscape was once filled with intelligent switch startups, such as Candera, Maranti Networks Inc., MaXXan Systems Inc., Pirus, Rhapsody, Sandial Systems, and Sanera. Most of the lucky ones were acquired – Sun Microsystems Inc. (Nasdaq: SUNW) bought Pirus, Brocade Communications Systems Inc. (Nasdaq: BRCD) gobbled Rhapsody, and McData Corp. (Nasdaq: MCDTA) scooped up Sanera. (See Pirus Gets Sun Tan, Brocade Scoops Up Rhapsody, McData Sweeps Up Nishan, Sanera, and Sun Sings New Storage Song.)

Others weren't so fortunate. Candera and Sandial went under last year, and Maranti is about to follow (see Candera's Closed, Sandial's Out, and Clock Ticks on Maranti). That leaves MaXXan and Troika standing. “The field is starting to narrow out,” Terrell says.

That’s true for startups, but the field is broadening for established players. EMC Corp.’s (NYSE: EMC) Invista product brings Brocade and Cisco Systems Inc. (Nasdaq: CSCO) into the intelligent switch space, with McData due to follow in six months (see EMC Unveils Invista). Other types of virtualization are available, notably Hitachi Data Systems (HDS)’s array-based TagmaStore and the in-band IBM Corp. (NYSE: IBM)SAN Volume Controller (SVC) appliance (see Hitachi Virtualizes EMC and IBM Sharpens Focus on EMC).

Can a startup hold its own against the likes of these? “There’s always going to be customers who will only buy from big vendors,” Terrell admits. “We’re not going to win against a tried and true IBM blue company or EMC account. But there’s an increasing demand from customers trying to change the game, who are tired of working with single vendors.”

Invista is Troika’s closest rival from a technology standpoint –- both vendors offer out-of-band products built on the SPAID (split path acceleration of independent data streams) architecture (see Spaid Breaks Ground). But EMC just got Invista out the door last month, and it’s limited mostly to data migration across arrays for large shops. Troika's box can also do remote replication, snapshots, and virtual volume management.If Troika is too small to go head-to-head with EMC, Terrell hopes to help other storage companies compete with EMC. He doesn’t rule out an alliance with IBM, which has kept the door open on delivering an out-of-band switch (see IBM's Monshaw Talks Virtual). “They will have to,” Terrell says. “We find it pretty easy to go in with the SPAID approach and win against IBM. Winning deals against IBM in the field is going to get their attention more than going to them with a Power Point [presentation].”

Hewlett-Packard Co. (NYSE: HPQ), which has failed with several virtualization initiatives and is big on OEM deals these days, is another potential partner for Troika (see HP Recasts Virtualization Box, HP Opens Doors to CASA, and HP Upgrade Features OEM Crowd).

StorageTek is certainly an OEM candidate, although not a sure thing. StorageTek has hinted at an OEM virtualization deal, but is unlikely to close any OEM deals until it becomes part of Sun (StorageTek Plans Virtualization Device and Sun Acquires StorageTek for $4.1B). Even then, it’s unclear if Sun will want another virtualization product. Sun’s flagship storage system, the StorEdge 6920, is built on a virtualization controller it acquired with Pirus.

Terrell says Troika will expand its functionality into disk backup, with virtual tape and continuous data protection in development. For now, the focus is on sales and marketing. He expects to add around ten or so employees to the current headcount of 45, in hopes of making Troika profitable in 2006. Anthem Venture Partners, Draper Fisher Jurvetson, Dynafund Ventures

Hamilton Apex Technology Ventures, and Windward Ventures participated in the round.

— Dave Raffo, Senior Editor, Byte and Switch0