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Start-Up Data Storage Firm Actifio Hits $1 Billion Mark

March 27, 2014

Social networking companies, online game developers and other consumer-focused tech start-ups have attracted huge investor attention, and lofty valuations to boot.

Today, a young start-up, Actifio, is drawing similar investor interest in a decidedly unflashy sector: data storage.nyt

On Monday, Actifio is to announce that it has raised $100 million in new financing, valuing the entire company at $1 billion. That vote of confidence places Actifio in an elite club of start-ups with 10-figure valuations, stepping up the pressure on the company to deliver on its ambitions.

Though little known outside of technology circles, Actifio is rapidly gaining large corporate customers as it attacks a problem that the incumbent data storage firms have been slow to address. Its software, which costs an average of $349,000 for a three-year contract, allows a company access to a virtual version of backup copies of data, freeing up space and improving the overall efficiency of the company’s data storage.

Actifio’s backers draw a comparison to VMware, which was a leader in creating software that was critical to cloud computing. While that expanded the amount of work a single computer server could do, Actifio’s product is aimed at enhancing a data center.

“An idea like this comes along about once a decade,” said Jamie Goldstein, a partner at North Bridge, a venture capital firm that was an initial investor in Actifio and participated in the latest financing round. “Data has become such an important part of the tech economy, and the entire economy. Anybody who is collecting a lot of data is going to be facing this problem.”

Actifio, which was founded in 2009, hopes to go public at some point next year, and its investors are betting on a big payday. A hedge fund company, Tiger Global Management, led the latest investment round, which included participation from Andreessen Horowitz, Greylock Partners and other venture capital firms.

The company, based in Boston, is not profitable, but it had other impressive numbers to show its investors. It says that its bookings grew by 182 percent last year, and that it now has more than 300 business customers around the world. Those include companies like Time Warner Cable, Netflix, IBM and Unilever.

One customer, the big private equity firm Kohlberg Kravis Roberts, is in the process of putting the software in place in North America and Europe. Peter Sung, a vice president for information technology at K.K.R., said the software greatly reduces the time it takes to retrieve copies of data and makes those copies easier to manage.

Actifio has a potential rival in EMC, the data storage giant, which last year increased its focus on managing copies of data. In response, Actifio’s founder and chief executive, Ash Ashutosh, wrote a blog post sarcastically congratulating EMC on “recognizing the transformational impact of copy data management.”

But for the most part, large data storage firms have hesitated to embrace this business, in part because it poses a threat to their main activity of selling more storage space, said Ashish Nadkarni, a research director at IDC.

“This was never a technology problem,” Mr. Nadkarni said. “It was always a matter of, ‘O.K., so, if we bring this technology to market, it is going to mean less sales for us.’ ”

Mr. Ashutosh previously had success in a related business. Another company he founded, AppIQ, which made software to manage storage infrastructure, was sold to Hewlett-Packard for $300 million in 2005.

After a stint at H.P., he joined Greylock as a partner. The idea for Actifio came while he was analyzing trends in the field of enterprise software companies, he said.

The comparison to VMware, invoked by Actifio itself, is a complicated one. VMware has sought to reposition itself in recent years, in the face of increased competition and a changed technology landscape.

But Actifio does not expect to encounter a similar problem.

“I think we have tremendous patent protection here,” Mr. Goldstein, the North Bridge partner, said, “and a very large lead on the rest of the market.”

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