More funding is on the way for disk-based backup software maker

August 27, 2004

4 Min Read
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Avamar Inc. is waiting for the ink to dry on approximately $15 million in new funding, which it plans to spend on sales and marketing of its disk-backup software.

"We plan to announce funding within the next couple of weeks," says CEO Kevin Daly. "It's not quite closed, but it's completed."

If all goes as planned, Avamar will expand marketing and sales for its Axion product line, which is based on software that uses a kind of digital shorthand to slash the time required for disk-based backups. "First we chew data into pieces, and then only store what we didn't see before," Daly says.

Sounds like something folk might run from instead of buy, but Daly claims Avamar's technique cuts the operational costs of backing up data by more than half. "You can avoid media costs, communications costs, people costs. There's a very rapid payback." Forty customers have purchased the product so far, he says -- one of the latest being a fellow traveler in the storage market, Adaptec Inc. (Nasdaq: ADPT). (See Avamar Axion Backs Up Adaptec.)

Avamar sells its wares in two markets: For smaller companies that have 1 to 2 Tbytes of storage on hand, Avamar offers an appliance for about $45,000 that bundles Avamar's software with disk storage from undisclosed OEMs. For large enterprise customers with 20 Tbytes to 50 Tbytes of storage, Avamar produces software that runs with big disk systems from the likes of EMC Corp. (NYSE: EMC), Hewlett-Packard Co. (NYSE: HPQ), and IBM Corp. (NYSE: IBM). Avamar's software runs under Unix and Linux, as well as Windows.Avamar doesn't have a formal relationship with any big disk-based backup vendors. But customers often ask the startup for software they can use with systems such as IBM's FastT -- to replace tape backup in one location, for instance. Once that's in place, it's likely they'll want to expand their use of Axion to other parts of the enterprise, Daly hopes. "We can usually count on $1 million from an enterprise when [deployment is] fully fleshed out."

This doesn't mean Avamar is out to replace tape -- not right away, anyway. It's in closer competition with vendors of backup software, such as Veritas Software Corp. (Nasdaq: VRTS), as well as other vendors of disk backup systems that are aimed at replacing tape, including Data Domain Inc. EMC and Network Appliance Inc. (Nasdaq: NTAP) are also selling their own takes on disk backup.

Avamar claims to be faster and more efficient than systems that aim to improve backup performance by substituting disk for tape. Daly says that's because Avamar uses techniques such as digital shorthand and compression that build on the advantages of disk access, instead of simply relying on its speed relative to tape.

Daly claims one customer, for example, is using Avamar's product to completely back up its data three times daily -- triple what many companies are able to handle. And while that company, an unnamed financial trading outfit, is using just 1 Tbyte of storage, the backups are going over the same network traders use for transactions, which reflects well on Avamar's ability to pack backup data neatly for network travel.

So far, Avamar appears to be convincing customers and investors that it's different enough to bank on. But whether it can maintain that position in a market where larger fish are bent on continually improving their disk backup remains to be seen.The odds are tough to call. Avamar sticks with backup and recovery (at a rate of about 100 Mbytes per 4 seconds over Gigabit Ethernet, according to Daly). As other vendors add fancier applications to their disk-backup wares, that could be a threat to Avamar. On the other hand, Avamar's success so far could be attributable in part to its ability to do one thing in a direct, relatively uncomplicated fashion.

Whatever the future holds, Avamar won't be going back for more funding after this, Daly says. Instead, it will focus on sales. Besides adding more sales and marketing folk to the company's employee roster of 55, Avamar will add channel partners as well. Its new funding should help it expand its roster of partners to 25 within the next couple of months. "We've already increased our channel partnerships by 50 percent in the last three months."

Execs say the upcoming funding round includes both new investors and former ones, such as Benchmark Capital and Goldman Sachs & Co. (see Avamar Gets More Dough).

Mary Jander, Site Editor, Byte and Switch

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