How a data storage startup reached unicorn status by closing a new $100 million funding round during the coronavirus pandemic
- Accessing stored data is a major problem that companies face in the quest to adopt artificial intelligence and other advanced analytical tools.
- VAST Data's all-flash storage solution makes it easier for corporations to quickly and continuously analyze large sets of information.
- The startup just raised $100 million, bringing its total valuation to $1.2 billion. This is on top of a recent $80 million funding round, of which $40 million still remains.
- "We did this to offer the peace of mind that we're here to stay forever," CEO Renen Hallak told Business Insider.
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Artificial intelligence continues to be a major investment for companies, but enterprises are, in many cases, finding it exceedingly difficult to adopt the advanced tech.
One reason for that is the state of the databases that power the applications.
Startups that help companies organize stored information, for example, are raising millions of dollars as demand grows. But apart from cataloging the data, storing it all in one accessible location is a challenge.
VAST Data offers a solution. The company's storage platform makes it easier for organizations to tap into very large datasets. And it just raised $100 million in its latest funding round, according to a release on Thursday, bringing its total valuation to $1.2 billion.
CEO and founder Renen Hallak says reaching so-called unicorn status during the coronavirus pandemic - which is leading other startups to curb operations or lay off employees as funding dries up - is a testament to both its investors and the solution it provides to clients.
"We see storage as the anchor of the data center and expect to expand beyond storage and provide that next-generation infrastructure for the new applications," he told Business Insider.
VAST previously raised $80 million from investors including Goldman Sachs and venture capital firm 83North. And $40 million of that has yet to be touched.
Now, the war chest of $140 million "will last for a very, very long time," said Hallam.
That's part of his overall effort to balance expansion with cash flow - in contrast to the typical grow-at-all-costs path some unicorns take.
"We did this to offer the peace of mind that we're here to stay forever and we will be here to support [customers] for the long term," Hallak said. "And based on the early success that we had in 2019, we want to make sure that we capture as much of this opportunity as we possibly can."
A new(ish) spin on storage
The problem VAST aims to solve is complex, but essentially, companies historically had to store information in different tiers of hard drives that varied in terms of capacity and speed.
So the noise you hear when trying to access a file? That's the hard drive at work. While the equipment can only "spin" at certain speeds, the storage levels are more variable - which widens the gap between capacity and performance.
That means companies with large amounts of data often had to move certain information to a faster tier when it was needed, then move it back down into the archive when it was no longer required.
While tedious, it wasn't a major impediment in the past. But now, as companies look to adopt AI, they need to tap into all the data available and continually analyze it for insights.
VAST's all-flash storage system can effectively act as a universal repository for enterprises.
"In order for them to do that, it needs to be very, very accessible," said Hallak. The VAST platform is "big enough, scalable enough, and resilient enough that you can pull all of your data on it in an easy way without needing to worry about storage."
The company's approach isn't totally novel. A decade ago, similar startups raised large sums of money from investors then eventually fizzled out. But now, VAST's fundraising round indicates the hype is back as more corporations look to harness data.
Take a hedge fund like Square Point. Prior to more advanced analytics tools, the investment firm may have only reviewed trading data as far back as two weeks. And the process could take several hours.
But now, with a storage solution offered by a company such as VAST, the fund can quickly analyze information from the past several years.
"This ability to access a lot of data very quickly enables these new applications and changes the way the organizations perform their business around it," said Hallak.
The National Institutes of Health is also using VAST's storage solution for research on the coronavirus. Life sciences firm Ginkgo Bioworks employs the system for its genomics studies. And medical imaging and AI firm Zebra analyzes CT and MRI scans stored on the platform.
Fundraising during the coronavirus
Like other startups that launch fundraising rounds at the start of the year, VAST had to grapple with the operations disruption from the coronavirus pandemic.
Hallak, for example, had to pitch to several new investors virtually. "I haven't met them face to face yet," he said.
Coupled with the pandemic, the startup community is still reeling after WeWork's highly publicized implosion last year. Hallak said VAST is in a much different position.
"We expect to break even and become profitable a lot faster than those that flamed out and a lot faster than those companies in this space that came before us," he said. "We don't need to spend like crazy to show business growth."
The average sales price per customer is over $1 million, Hallak added, and it has had several deals topping as high as $6 million. It's all part of an effort to build strategic, long-lasting partnerships with clients.
"We can show high revenue growth, but on the other hand we don't need as many salespeople," he said. "It's a very efficient business."
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