In June, the company announced it had raised $4 million in its second round of funding, from Fidelity Growth Partners India, and original investors Nexus Venture Partners and Kae Capital, bringing CloudByte's total funding to $6.1 million. In June, the company also hired a new chief executive, former SanDisk executive Greg Goelz, to be based at its headquarters in Campbell, California.
The two-year-old software-defined storage company's sales pitch is that it enables cloud service providers and enterprises to manage their storage efficiently and in a cost-effective manner. CloudByte says it is the first to offer guaranteed Quality of Service (QoS) to every application from a shared storage platform.
According to experts, current storage infrastructure has not really been designed for virtualisation or what's called the cloud. Users are often forced to buy more storage than they need. Customers sharing a multi-tenant cloud system find a spike in demand on one tenant can affect performance on others because their service provider is unable to isolate and enforce performance limits.
CloudByte's CEO Goelz says the ability to dynamically allocate resources for performance is a unique feature of the company's product. "An enterprise or service provider can tailor the size of performance they need to very granular levels. That's really important for them because not one size fits all and not all applications need the same amount of performance."
Simon Robinson, vice-president of research and an expert on storage with the analyst and data company The 451 Group, says CloudByte's product could look attractive at a time of limited IT budgets. "Many organisations had to buy much more storage than they required, just so they didn't run out of capacity. What the software essentially does is it allows you to provision exactly the required levels of capacity but also performance for each application," explains the London-based analyst.
CloudByte was floated in Bangalore by IT industry veterans Srivibhavan Balaram, Felix Xavier, Umasankar Mukkara and Shailesh Bam. Sunil Navalgi was another early member. After the seed round of funding, CloudByte Inc. was registered in the US around August 2011. The Bangalore-based operation is a 100 per cent subsidiary of the US company.
CloudByte has a staff of around 50, split roughly 90:10 between Bangalore and Silicon Valley. The research and development team is based in Bangalore, while sales and support functions are shared by the two centres. Co-founder Xavier, also the chief technology officer, moved to California in January to help expand the company's North American footprint.
The start-up currently has two paying customers, both of which are service providers in India. According to Xavier, CloudByte is on the verge of acquiring a major client in Japan, and is talking to potential clients in Australia.
The company has about a dozen clients in various Proof of Concept stages in the US, which promises to be a major market for their product. Xavier notes about 80 per cent of cloud service providers are in the US. However, Goelz sees opportunities around the globe. "Amazon has data centres around the globe but I believe the credit for market size goes to North America," he says. "So, that's sort of deceptive, like, where in the cloud is this?"
Revving up for revenue
Emerging markets are an equally significant market, according to Naren Gupta, a co-founder of Nexus Venture Partners, who is based at their Menlo Park, California office. "Cost considerations are more important in emerging markets, the price points for their service are lower and CloudByte gives not just guaranteed performance but also optimal usage of resource," says Gupta.
Company leaders say they are focused on expanding the installed base at this stage. According to Xavier, the funding will get them through 18 months. Acquiring more clients during that time would increase the company's value before the next round of funding. "Once you establish, it's going to be operating on scale. That's when we are going to look for revenue generation."
CloudByte's investors seem to agree. Nexus Venture Partners'Gupta says, "The next 12 months is a time to build a solid customer base, get feedback from them, refine your business model, work closely maybe with 50-100 customers and then the next 12 months, you figure out how you're going to scale out. So it's not going to happen overnight, but when it happens, it's going to happen very rapidly."
Will customers bite?
Before it can generate revenue, however, CloudByte must convince enough customers to switch, a challenge for a newcomer. It has to compete with storage market leader EMC and well-known names such as NetApp, as well as giants like IBM, HP, Dell and Oracle. SolidFire is another storage company that offers guaranteed QoS for cloud service providers, but Goelz points out their solution comes with new hardware.
Xavier admits customers could be wary of replacing existing vendors and moving their critical business data to a new platform. Inertia is another barrier. However, he adds the same challenges would work to CloudByte's advantage later. "The same way we see resistance to enter into the market, it's going to be sticky for us once the customers are coming in," he says.
CloudByte sees its software-only solution as a unique advantage to new users as well as clients with existing systems, as it fits into other ecosystems equally well. That, coupled with scalable storage and guaranteed QoS, its officials believe, will ensure the start-up gets to the pot of gold on the other side of the cloud.
SOFTWARE FOR STORAGE
- Overview: Software-only storage solution; also allows clients to use existing storage infrastructure and components married with CloudByte software; first to offer guaranteed Quality of Service to every application from a shared storage platform.
- Locations: Campbell, California (HQ, sales, support); Bangalore (R&D, sales, support)
- Funding: Series A - $2.1 million; Series B - $4 million
- Investors: Fidelity Growth Partners India; Nexus Venture Partners; Kae Capital
- Revenue strategy: Subscription model, perpetual licence also offered to some clients
- Challenges: Established incumbents; resistance to new technology; crowded market.
EXPERT TAKE: Simon Robinson
The timing is great. There is an appetite for innovative and disruptive approaches to storage.
CloudByte is software only, so it is able to fit on top of standard hardware you already have or if you just wanted to buy some commodity service. So, they have a flexible business model.
The storage market is dominated by some very large organisations. But there's this legion of smaller competitors as well. CloudByte is a very, very small company and it needs to find a way of getting its voice heard. It's obviously looking to establish itself as a Silicon Valley company; that's something they have to do.
I haven't seen anything quite like the way CloudByte has put together its software. I'm not 100 per cent convinced the software is unique. There are companies such as SolidFire doing a similar thing. In fact, its messaging is a bit like some of the things SolidFire is saying. But that's not necessarily a bad thing.
One thing they probably will have to do is a partnership or at least some reference architectures with some hardware vendors. The value is in the software, but folks like to buy solutions. So, it needs to have some kind of certification or integration with hardware platforms at some stage. They've got integrations with Open Stack and Citrix. I think they're working on one with VMware as well. Those are things you need. They're doing pretty much the right things.
Simon Robinson, Research
Vice-President - Storage, 451 Research