Boulder, Colorado-based ProStor (www.prostorsystems.com) is a company in the storage space developing a new, disk-based removable storage system. Techrockies spoke with Steve Georgis, CEO of Prostor, about where the firm fits into the storage market, why it decided to tackle removable storage, how it managed to get venture funding.
What is the market, and what is your technology?
Steve Georgis: We formed Prostor in 2004, to fill what we saw as a big hole in an emerging marketplace. As the market started to move away from tape-based backup and tape-based archive, into disk-based data protection, and while the value proposition around disk was pretty obvious, what we saw was missing was that you still needed removable media. The founding team of this company, myself included, were long time tape industry guys. We were keenly aware of how the industry used backup media, and saw the opportunity to be able to combine the benefits of tape storage--the removability, portability, long time archiveability and low cost benefits--with the benefits of disk--speed, performance, reliability, and capacity roadmap--in a removable disk cartridge media. We have a product called RDX, which is a multi-vendor standard that has been addressed the continued need for removability with disk-centric backup and archive environments.
There are lots of companies who have tried removable cartridges in the past, what made you believe you could make it work this time?
Steve Georgis: What we saw, that would make it work, is large customer adoption. What we saw a couple of years ago, was the trend in small form factor disk capacity--price, performance--and map those against what you see against tape. Right about now, the lines were going to cross. It would be possible to buy a disk drive for less than it costs to buy a tape cartridge--a pretty significant crossover point. The other things we saw were that you could store data in native file format, avoid the intermediate translation to tape format, and avoid tape formats which go obsolete in 5-6 years and which have to be migrated forward. We believed that the economics and feeds and speeds lined up appropriately. That's one side. The other side is the opportunity for the low end of the market, the low end enterprise. Volume server providers like Dell sell millions of servers, but the tape backup technologies they sell had all reached end of life. There was a big hole forming. One of the key things of that hole is that it required a certain price point, and there was no other tape technology with a future road map to drop down to reach a really low price point. It was already an acknowledged thing with OEMs, that the next product was not tape, but what it's going to be? Removable disk really came in to fit the bill. It offered the capacity requirements, and speed requirements, at the right price. It's roughly half the price of existing tape technology. There was a big hole opening up in the marketplace, and disk was the only way to fill it.
Interesting. We also see you have some good venture backers?
Steve Georgis: We've had two rounds of financing. We're headquartered in Boulder, Colorado, and locally we have Boulder Ventures as a lead investor -- one of the premier funds here locally. We syndicated them with NEA to be able to do the first round. We raised another $12M in a round last summer, where we brought in Sutter Hill Ventures to join the syndicate and lead the Series B.
There's been an aversion to funding storage, and all hardware companies, by the VC community recently, how did you manage to get VC funding?
Steve Georgis: The first thing we showed them was a really big existing market opportunity. It was not hypothetical; it was an existing, $5 billion dollar problem. We were able to bring customer like Dell in who told them they needed a new product, and that nothing in the market exists. The second thing is we developed in the RDX format a new platform to add value in a number of different ways. Because it's disk, we can do a lot of things that previously were not possible with tape and optical. We're migrating this up market, and it is designed to be enterprise class. We're migrating up market with software and delivering it into applications, beyond server backup. Another aspect to our business plan is that you are right about hardware--hardware has become a loveless business to be in. It commoditizes quickly, and your margins collapse. What we did knowing this was a high volume market, and that we were entering it as a high volume, low price market segment, is rather than manufacture the product ourselves, we license it to incumbent, branded manufacturers. The first two licensees are Tandberg and Imation. Imation is the biggest media company in the world, and they manufacture it using their supply chain and market it using their distribution channels. We are paid on a royalty basis--it's a 100% gross margin business.
So you just do the design?
Steve Georgis: We do all the design - we own the intellectual property, and we license others to do the manufacturing and the distribution. What we do also with license partners is we help them win OEM accounts. The first big OEM that has adopted the RDX format is Dell. Dell launched the product in Q4 of last year. Basically it has appeared as a new backup product, which they have rolled out on all their server and workstation platforms, and you will see it replace tape format as they reach natural end of life.
It's pretty tough for a startup to get a win at Dell, how'd you manage that?
Steve Georgis: That was a little bit of our secret sauce. The founding management team has been in the OEM business and the tape business before. One of our founders founded Exabyte before this. We had pre-existing relationships, and they new that the market opportunity existed, and we already had relationships. Before we even started the company, we were meeting with Dell and talking about the problem, and we had their buy in before the company was really formed. Otherwise--you're right, if it had just been any unknown startup, that would have been virtually impossible.
Where is the product now--are you shipping?
Steve Georgis: The product has been shipping since October of last year. We're now ramping up, and sales are growing quite nicely. We are now marketing and working with other OEMs, that we believe will adopt the product this year. Dell is a big domino, and we see this market growing and believe, now that there are multiple manufacturers, that it's being positioned in the market as a multi-vendor standard to replace tape at the low end of the market. We're also developing a new set of products to leverage what's already been done, to apply the RDX solution in other segments.
I also wanted to mention, is there is a company neutral web site, www.rdxstorage.com, which is the place to find out all about the technology and various companies behind it.
Thanks for the time and the interview!