By Evelyn M. Rusli, Kirsten Grind and Shira Ovide
Pure Storage Inc., which is trying to remake corporate-data
storage with technology that originated in smartphones, is joining
the ranks of the most richly valued startups.
The four-year-old company on Wednesday confirmed a new
investment round that values Pure at more than $3 billion. Pure
said it raised $225 million in new financing from some of its
existing shareholders and one newcomer, investment-management firm
Wellington Management Co.
On Tuesday, The Wall Street Journal reported Pure was finalizing
new financing with investors including Wellington at a valuation of
roughly $3 billion or more.
This is the second big funding for Pure in less than a year,
following a $150 million financing round last summer that took the
company' valuation above $1 billion. Pure said Wednesday it now has
raised $470 million in total, as the company battles longtime
storage-market leaders such as EMC Corp. and a fleet of other
startups.
Only about 15 companies backed by venture-capital firms are
valued at more than $3 billion, according to Wall Street Journal
research.
The deal is the latest sign of investor appetite for a new
roster of companies betting they can replace or supplement
companies' existing computing gear and software. Database sellers
Hortonworks Inc. and Cloudera Inc. and email-marketing firm
Campaign Monitor are among sellers of technology to companies that
have raised $100 million or more from investors in recent
weeks.
The fundraising activity also suggests that, at least for now,
recent stock-price gyrations affecting technology companies aren't
broadly curtailing funding for startups.
Pure is among the best-known startups selling systems that store
corporate data on chips known as flash memory-the same technology
used to save information in smartphones and tablets. Flash storage
promises to fetch stored data much more quickly, and using less
energy, than the disk drives companies typically use to store their
digital information.
But flash memory remains a niche for most companies, in part
because it still costs far more per byte of data stored than
spinning disks. Research firm Gartner Inc. says about 2,000 storage
systems with flash memory shipped in 2012, and it expects the
number to climb to 20,000 systems by 2017.
A key selling point for Pure is software that compresses and
eliminates duplicated data, so the information requires less
storage space on the flash memory chips. Pure says the technology
effectively eliminates the cost disparity for companies compared
with high-end systems using disk drives.
Pure faces plenty of competition from both large and small
companies, including EMC and International Business Machines Corp.
Two flash-based startups, Nimble Storage Inc. and Violin Memory
Inc., completed initial public offerings in 2013.
Research firm Gartner has said it expects many smaller flash
storage vendors will fail in the next few years.
The company said its new financing round included mutual funds
T. Rowe Price and Fidelity Investments and hedge fund Tiger Global,
which also invested in Pure last summer. The company said earlier
investors Greylock Partners, Index Ventures, Redpoint Ventures and
Sutter Hill Ventures also participated.
In a blog post Wednesday, Pure Chief Executive Scott Dietzen
said he believes the company has a head start over other sellers of
flash-storage systems, and "the right thing to do" is to put
pressure on rivals by growing as fast as possible and spending more
money to improve Pure's technology.
Douglas MacMillan contributed to this article.
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