More Money for Maranti

Just when you thought competition couldn't get fiercer in the SAN switch market, along comes a startup with hopes of stirring things up even more.

Maranti Networks, based in San Jose, Calif., just scored $26 million in a third financing round, bringing its total funding to date to $57 million. The company's plan is to crack the director switch market dominated by McData Corp. (Nasdaq: MCDTA) and Brocade Communications Systems Inc. (Nasdaq: BRCD), where Cisco Systems Inc. (Nasdaq: CSCO) is also gaining a share (see Cisco Storage Growing Up).

Hang on. Can the market really take another player? After all, pricing pressures and a tight market are proving tough for even the dominant suppliers (see Brocade Shaves Heads and McData McDownsized).

New Maranti CEO Debbie Miller is hopeful. She has just replaced cofounder Kuldeep Sandhu, who remains with the company as chief strategy officer. She says Maranti's CoreSTOR switches include virtualization, replication, mirroring, and snapshot capabilities built into the software, giving them an edge over competitors that don't have all these integrated features.

So far, it seems Marantis closest competitor, from a technology standpoint, is Cisco’s MDS 9000 switches that run with IBM Corp.'s (NYSE: IBM) SAN Volume Controller software (see Cisco & IBM Serve Virtual Combo). Brocade and McData also have intelligent switch capabilities and won’t be far behind.With established players nipping its heels, Maranti's up against it, challenged to get customers to take a chance on an integrated solution from a startup that might not be around in the long term. And it has no paying customers -- despite claims to the contrary from cofounder and VP of marketing Harish Nayak two months ago (see Maranti Makes It to Market). Maranti now says the customer that Nayak formerly claimed was a paying customer is in reality one of five beta customers. Miller expects paying customers by the end of this quarter.

It's not the first time Maranti's had to backpedal on claims. It originally boasted of plans to release its first product in October 2002 but wound up hit with development delays and a layoff instead.

Now, at 70 employees, Miller says things have settled down. The new funding, which she says will bring the company to profitability, will be used to build up Maranti's sales and marketing staff, including a direct sales force that will target financial services companies until Maranti has a large enough installed base to attract channel partners.

As to the current volatility in the switch market, Miller says that could actually work to Maranti's advantage. “This is a great time not to have an installed base,” she says. “Our technology is disruptive to others who don’t have our advanced features... We're in a revenue-generating, customer-producing stage.”

Miller joins Maranti after serving as CEO of well-funded utility computing startup Egenera Inc.

until last February, when she announced she was stepping down because she no longer wanted to split time between her California home and Egenera’s Marlborough, Mass., headquarters (see Egenera Generates $30 Million). She has also held executive management jobs at IBM, Silicon Graphics Inc. (SGI) (NYSE: SGI), and Digital Equipment Corp.JPMorgan Partners led Maranti’s latest funding round, with participation of prior investors Menlo Ventures, Trinity Ventures, and Alliance Ventures. JPMorgan Principal Vikram Gupta joins Maranti’s board along with Aristos Logic CEO Anil Gupta.

— Dave Raffo, Senior Editor, Byte and Switch