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500% Growth Makes Actifio History’s Swiftest Storage Start-up

October 11, 2012

Silicon Valley’s VC star, Andreesen Horowitz, is poised for another huge IPO win. And a Massachusetts storage start-up believes it could be the reason.

In an October 5 interview, Founder & CEO, Ash Ashutosh, told me that at the rate it’s growing, he thinks his Waltham,Mass.-based Actifio could file for an initial public offering by the end of 2013 or the first quarter of 2014.

Ashutosh explained that Actifio did something I wrote about in my eleventh book, Hungry Start-up Strategy, that’s coming out in a few weeks – build a company to relieve customer “pain” that other companies aren’t targeting.

That’s a great strategy because potential customers don’t like to buy from a start-up since odds are good it will perish fast. So the best way to get customers to use a start-up’s product is to solve a painful problem that no other companies — like storage makers EMC (EMC), IBM (IBM) and others — are addressing.

Ashutosh is an expert in storage – before he started Actifio, he was Vice President and Chief Technologist for Hewlett Packard (HPQ)’s storage business and was a partner at Greylock Partners. But he left there in 2008 and decided to open Actifio soon thereafter with the idea of making “copy data management (CDM) radically more efficient.”

Companies make many copies of the same electronic data to analyze and share it and also to protect themselves if their computing infrastructure crashes, say, due to a blackout or to comply with record retention policies.

Those copies are produced by different people in different departments. In the past, those copies were stored in different ways – including magnetic tapes, hard disk, and even on paper hived away in boxes. Needless to say, storing so many different copies of the same data is not the greatest use of corporate resources.

Ashutosh saw clearly that several recent trends could make it possible for companies to obtain the perceived benefits of all those copies at a much lower cost. For example, the growing popularity of virtualization – a way to store and retrieve data with less hardware – coupled with the rising share of hard disk as the primary medium for data storage meant that CDM could get much more efficient.

And that meant that companies could have only one copy of their “production data” instead of “between 13 and 120.” And companies could “reuse that golden copy multiple times for multiple applications.” Fixing CDM was a $34 billion opportunity in Ashutosh’s estimation – one that no other companies were addressing.

So in July 2009,  Ashutosh opened up Actifio in the space abandoned by a failed Greylock portfolio company in Waltham.

And since the April 2010 introduction of its Protection and Availability Storage (PAS) product – an “appliance” consisting of a cluster of servers and software that costs companies anywhere from $50,000 and $1.2 million depending on their data volumes — Actifio has been growing at “500% year-over-year – faster than any enterprise storage company ever.”

Starting with four people, it now has 170 and 200 customers. And in late 2012, it raised $33.5 million in financing led by Andreessen Horowitz.

Behind that growth is a spectacular boost in efficiency – whatHungry Start-up Strategy calls a Quantum Value Leap — that Actifio customers get when they install its product. According to Ashutosh, Actifio’s product can cut by 95 percent the “data footprint” that companies create in their CDM process while reducing by 75 percent the amount of “network bandwidth” required to move it around their data centers.

Some customers save “at least $20,000 per month in tape management and $15,000 per month in backup costs. And the inefficiencies [Actifio can eliminate] are astounding — some companies pay $32 million a year now just to maintain their backup software.” And while chief financial officers like the idea of reducing such costs from $890,000 to $150,000, the users love how “dead simple” the product is to use.

Actifio’s future looks bright. It plans to add 80 people in the next year as it expands globally – hiring sales and marketing people and product developers. He expects Actifio to grow from 200 to 800 customers by the end of 2013 and is targeting the end of 2013 or early 2014 for an initial public offering.

People are a critical part of Actifio’s ability to grow as it has. Ashutosh said that he has been able to attract very experienced executives with outstanding track records because they are excited to join a company with “the opportunity to capture a leadership position in a $34 billion market with no competition that is growing at 500% annually.”

But managing a rapidly growing company is a challenge. As Ashutosh explained, “2012 is our break point.” By that, he means that as the company “is going from start-up to grown up.” And that means, he has been talking to his employees about how important it is “to consolidate our focus on quality when we release, sell and service our products.”

He expects that another such break point will occur after Actifio’s IPO.  By then, it will have revenues “between $100 million and $150 million and will control 10% of the market.” He expects that these results will make other companies aware of the size of the opportunity and attract competitors. And then Actifio will be tested to see whether it can innovate to stay ahead or turns into a company that squanders its early lead.

if Ashutosh remains CEO, I expect Actifio to stay ahead of the pack.

Original Article