Cloud storage startup Wasabi closed a $68 million Series B funding round. Founder and CEO David Friend says the Boston-based company will use the cash injection to bring the heat to Amazon.
“You don’t go up against Amazon, Google, and Microsoft with pocket change,” he said. “Data is one of the most valuable corporate assets. At Carbonite I heard, ‘who the heck is Carbonite and why should I trust you with our data?’ If you have enough money in the bank it’s obvious that you’re not going to go out of business anytime in the near future.”
Friend co-founded Wasabi with Jeff Flowers, the company’s CTO. The cloud storage startup is the fifth they’ve founded over the last 30 years. Before this venture they co-founded cloud backup company Carbonite in 2005. “Today it’s a NASDAQ company with a market cap of $1.4 billion,” Friend said.
Wasabi emerged from stealth in May 2017 and already has 3,500 paying customers with about 3,000 more in a free trial period, according to Friend. One of these is Kaleidoscope, a content analytics management startup that deals with massive quantities of data. Friend says the company is growing between 30 percent and 40 percent, month over month. “Growth is rather astronomical right now,” he added.
You could say Wasabi’s on fire. And yes, it’s hard not to get carried away by the puns it presents.
In addition to competing against Amazon Simple Storage Service (Amazon S3), along with Microsoft and Google cloud storage, Wasabi is targeting customers whose Dell EMC and Hewlett Packard Enterprise (HPE) on-premises storage is reaching end of life. They’re often looking for a cheaper and faster way to store massive amounts of data, and cloud storage provides both.
“Our vision is that cloud storage will become a cheap, fast, ubiquitous commodity,” Friend said. About 80 percent of Wasabi customers buy its cloud storage because of the price, and 20 percent choose it because of speed, he added.
David and Goliath
The company claims its cloud storage costs less than one-fifth the price of Amazon S3 and is more than six times as fast. It’s also compliant with Amazon S3, meaning a user can plug into Wasabi and it works the same. The startup also offers free, unlimited egress. “Amazon’s bill will frequently be two pages long with dozens of charges, Friend said. “We have only one line on our bill and that’s storage.”
Wasabi, which has raised about $76.5 million to date, bypassed traditional venture capital in its latest round. It instead raised money from industry veterans and family offices. “I think wealthy, successful entrepreneurs really like the idea of a David and Goliath story, that we would dare go up against Amazon,” Friend said.
He points to other recent financing rounds like Packet, which announced a $25 million Series B funding round this week to support its bare-metal cloud, and says customers don’t like cloud lock-in. They want a hybrid approach that includes cloud giants offering lots of different services as well as startups that focus on doing one thing really good.
“Packet is doing a better job of compute in the cloud,” he said. “Particularly, bigger users are putting together a hybrid-cloud approach, and I think that’s the way the market is going to emerge. Nobody gets a complete lock on a customer.”
While investors may be rooting for the underdog, they also recognize storage is a hot sector these days. Earlier this week Datrium closed a $60 million Series D funding round, and Cloudian closed a $94 million Series E funding round in late August.
Friend also admits that his latest company makes an attractive target for legacy vendors that lack their own cloud-storage technology.
“I would say somebody like an Oracle or an IBM or an HPE who have virtually no good cloud storage product will eventually come around and make us an offer we can’t refuse,” he said. “This will be an extremely attractive target because to do what we do is extremely difficult technology. A lot of people have tried and failed. Or we’ll just keep going and take the company public.”