3PAR Picks Up $30M

Utility storage startup 3PAR revealed today that it has clinched $30 million in a mezzanine funding round, which will carry the firm towards profitability and a possible IPO, according to the vendor's CEO, David Scott.

"The goal of this [funding] is to strengthen our financial balance sheet before we turn profitable," he told Byte and Switch, adding that this is likely to happen sometime in 2006.

The round, which brings 3PAR's total funding to $183 million since its foundation in 1999, was led by Integral Capital Partners, AllianceBernstein, and Open Field Capital. Existing investors Mayfield Fund, Worldview Technology Partners, Menlo Ventures, and Van Wagoner Capital Management also took part.

But the move may seem strange to some, particularly given 3PAR's growing traction with end users, racking up 140 customers and shipping 270 of its InServ storage servers. (See Top Ten Private Companies: Spring 2006.) Recent wins include large online businesses such as MySpace.com, Shopzilla, and Claria Corp., which join other large online firms announced over the last two years, such as eHarmony, FreshDirect, and Priceline.com.

Scott says that today's funding round will lay the foundations for more of the same: "It's to make sure that our prospect base of very large service providers, very large enterprises, and fast growth Internet companies, have comfort that we're bound to stay."Any notions that 3PAR went to the VC community with a begging bowl are wide of the mark, according to the exec. "We didn't set out to look for money -- we were approached by a number of external companies that were interested in investing. We're funding most of our existing growth out of operating cash flow," he adds, although he would not say whether today's cash influx means that acquisitions are on the horizon.

3PAR touts its Utility Data Lifecycle Management (DLM) technology as an alternative to EMC's ILM products, claiming the ability to reduce users' costs and complexity. (See 3PAR Intros Utility DLM.) Certainly, one of 3PAR's initial innovations, thin provisioning, has buoyed the supplier's success by enabling users to do more with less disk.

The startup's deals with MCI -- now part of Verizon Communications -- and with Savvis Communications are evidence of the vendor's emphasis on big, service-oriented customers, something Scott says will continue. (See Savvis Stakes Virtualization Claim.) "Our focus is on anybody who is an external service provider or an internal service builder," he says.

What odds, though, on a public offering at some point in the future? "A mezzanine round is typically the last one that that you have before you plan to exit via an IPO. Unless anything significant happens, that is the focus we expect to have." But Scott's giving little away on deadlines. "The milestones that we want to hit first are profitability and predictability of our revenue streams."

Stranger things have happened. Even though 2005 was a barren year for storage IPOs, CommVault recently bucked the trend by filing for its public offering. (See CommVault Files for IPO, CommVault's Taking the Plunge, and In the Public Domain.) Although regarded as a long shot, 3PAR is one of a number of firms, including replication/migration vendor Softek, backup vendor Asigra, application acceleration firm NetEx, and clustering startup Isilon, that have been identified as possible IPO candidates. (See 2005 Top Ten: '06 Storage Predictions.)Despite all the fuss about 3PAR's funding, Scott emphasizes that the firm is still some way from delivering the next version of its technology, adaptive provisioning, which will add policy management to the mix. "It will be delivered in the 2007 timeframe," he predicts.

James Rogers, Senior Editor, Byte and Switch

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