The death of the storage startup

Well. It was nice while it lasted.

The cloud (read: AWS, Azure and Google) has displaced on-premise IT.

Anyone that doesn't believe the public cloud’s impending destruction of the traditional storage vendor is absolute mad.

2016 is going to be a rough year for storage. With a decreasing market, a period of heavy VC investment, no IPO market and massive consolidation, there isn’t a clear exit path for storage startups anytime soon.

Thats only a small sample of the news that comes out on a weekly basis about the transformative effects of the public cloud.

In my conversations with customers over the past two months, one thing has become abundantly clear: no one wants to deal with storage vendors anymore, especially startups. The long sales cycles, the vendor lock-in, the IT team needed to manage the growth, is an increasingly tough sell in age of the public cloud. A lot of them have never even heard of these storage startups…

Actifio, Reduxio, Kaminaro, Tintri, Pure, Qumulo, Cohesity, Rubrik, Tegile, Violin, Avere, Nutanix, Simplivity, Nimble, Primary Data, Nexgen, Nexenta, PernixData, Hedvig, Druva, Coho Data

Its not to say these companies don’t have stellar tech that actually works. Some of the engineers working at these companies are really bright. The market has just been too crowded.

It used to be that AWS was considered the wacky experiment. Now the opposite is true.

Take a look at all of the storage vendors out there today, regardless of how “successful”, “public”, or “transformative” their technology is, and you’ll notice that none of them are cash-flow positive. Nutanix — in the red. Pure — in the red. Even these “successful” ones are losing money hand over fist.

Nimble Storage, The crater, RIP 2015

Storage startups truly have no underlying technological advantage…

So anyone who has a monopoly will pretend that they are in incredible competition; and on the other end of the spectrum if you are incredibly competitive, and if you’re in some sort of business where you will never make any money, you’ll be tempted to tell a lie that goes in the other direction, where you will say that you’re doing something unique that is somehow less competitive than it looks because you’ll want to differentiate, you will want to try and attract capital, or something like that. — Peter Thiel

The public cloud is real.

If you are an investor… either angel, VC, institutional, or public… I’d take every talking point from a storage startup about how their storage is better than everyone else’s with a huge grain of salt. Storage is a commodity, Carriages in the time of the car. In the end, you don’t need it to look awesome, or become data-aware, or become wholly omniscient of your entire universe of IT. You just need it to store data. Hm, I know of a website where you can get that…

2016 is going to be a wild ride. It’ll be interesting for sure.