VCs Add $15M More to Data Domain

Data Domain Inc. today closed a $15 million funding round that its CEO says will take the disk-backup startup to profitability in a year (see Data Domain Closes $15M Round).

CEO Frank Slootman says Data Domain doubled its revenue sequentially last quarter after rolling out an enterprise version of its backup appliance (see Diskers Enjoying Tape Woes and Data Domain Targets Enterprise Backup ). The startup will have to continue to double its run rate to reach Slootmans goal of turning a profit midway through 2006, which is why he will use most of the new funding to beef up sales staff. Slootman says he expects to add about 15 to 20 sales and support staffers to the 70-person Palo Alto, Calif.-based company.

Slootman says Data domain has around 110 customers since it started shipping in February 2004. About 30 of those customers have been added since it launched its larger appliance earlier this year. “This will help us turn the corner," Slootman says. “We’re going to start making cash instead of burning it.”

That won't be easy, considering Data Domain's competition is swelling with established storage players as well as startups. When it first started shipping, Data Domain was among an early group of startups promising a better way of doing backups than tape provided (see Disk Backup's a Red-Hot Idea). After several costly security lapses involving tape, and the arrival of cheaper SATA drives and new disk-backup technologies such as virtual tape libraries (VTLs), content addressed storage (CAS), and continuous data protection (CDP), Data Domain’s battle is to convince customers it offers a better alternative to other disk vendors (see A Tale of Lost Tapes).

“I’ve been here a little over two years, and when I started it was disk versus tape,” Slootman says. “Now it’s disk versus disk. We don’t have to tell customers tape sucks, they come to us and say, ‘We’re well aware of that.’ ”