“If you look at the history of technology, when the first company in a new technology segment gets out and IPOs, four to seven quarters later there’s usually an M&A scramble,” he said.
“What is means: first the big companies deny these little companies have valuable marketplaces,” Nash said. “But once the little company IPOs, these big companies say, ‘heavens, that’s an extremely valuable segment.’ The big company internal staff says ‘we can develop that technology, just give us a while.’ And that’s where the four to seven quarters come in.”
This is the time period during which the major players try to build their own before turning to acquisitions to boost their technology.
Indeed, since Nutanix’s IPO, the sector has seen a flurry of mergers and acquisitions.
In January 2017 Hewlett Packard Enterprise (HPE) bought HCI software startup SimpliVity. And earlier this month HPE closed its acquisition of SDN fabric vendor Plexxi, and said it will weave Plexxi’s technology into its HCI products.
In Gartner’s first-ever HCI magic quadrant, published in February, four companies dominate the hyperconverged “leaders” quadrant (Nutanix, Dell EMC, VMware, and HPE). Three (Cisco, Huawei, and Pivot3 follow close behind as “challengers.”)
“Of the seven companies, six are large public companies, and only one is a private company — Pivot3,” Nash said. “We stand out, and our position is pretty clear. The hyperconverged market is a massive market. Analysts say over half of IT infrastructure is going to use this technology. Anyone in the infrastructure business can’t ignore half the market, which means they are all going to have to be in it. If you look for potential acquisitions, Pivot3 is going to rise to the top of that list.”
Founded in 2016, the Austin, Texas-based company has raised $253.4 million to date.
Pivot3 uses super-fast NVMe flash architecture, and its policy-based Quality of Service (QoS) engine differentiates its HCI software stack from the competition, according to analysts.
The company saw a more than 60 percent increase in bookings during the first quarter of 2018 compared to the first quarter of last year. Large enterprise and Fortune 1000 customers represented 67 percent of its first-quarter sales.
Pivot3 also reported a 56-percent increase in customers using its HCI to support multiple mixed-application workloads from the fourth quarter of 2017 to the first quarter of this year.
Acquisition or IPO?
All of this does make the company an attractive acquisition target — maybe for someone like Cisco looking to push HPE out of the no. 3 vendor spot. And Nash certainly sounds like a CEO who is shopping his company.
Nash admits the company is open to an acquisition. “A lot of people in the industry know I’m pretty open to talking,” he said. “We’re also willing to partner and extend our market reach by partnering.”
But he is realistic, adding that “80 percent of successful companies get acquired versus IPO. So that also says we’re more likely to get acquired.” Still, “we’re running the company as if we’re going to IPO,” Nash continued.
In other words, everything is on the table.
“We have a great position in the market, we’re growing about 65 percent a year, and we’re headed toward profitability,” Nash said. “Those are also great things for an IPO.”
He expects Pivot3 to turn a profit by the second half of 2019. This could set the stage for an IPO in late 2019 or early 2020. “By that time, we most likely will be ready to IPO,” he said.
Unless, of course, some other infrastructure technology player gobbles it up first.