New SanDisk Venture Fund Alights on WhipTail

The Wall Street Journal Dec 13, 2012 Back to press

Big tech companies frequently learn they don’t have all the good ideas, but their money can provide a window into innovations at startups SanDisk is the latest example.

The company, known for chips and other products that use flash memory technology, on Thursday is announcing a $75 million venture fund to make equity investments that advance SanDisk’s strategic interests. Its first move is joining a new funding round for WhipTail, a New Jersey startup selling systems that use flash technology to store data from server systems.
 
WhipTail, which was founded in 2007, says the new $31 million infusion comes from a group that includes traditional venture capital firms as well as “an unnamed Silicon Valley industry titan,” in addition to SanDisk.
 
Underlying the action is a widening recognition that flash memory–already a mainstay of devices like smartphones and tablets–is one of the biggest technology changes to hit computer rooms in a very long time.
 
“I view flash technology as having a once-in-a-decade sort of an impact,” says Sumit Sadana, SanDisk’s executive vice president and chief strategy officer.
 
He has reason to hope that is true. SanDisk, through a joint venture with Toshiba, runs big factories in Japan that churn out flash chips by the millions. It is also known for thumb drives, cards of the sort used in digital cameras and other flash-based products.
 
More recently, SanDisk has been trying to crack the corporate market in a big way. It has developed its own solid-state drives for computers, which use its flash memory as well as proprietary controller chips. SanDisk also recently made three acquisitions of companies specializing in products aimed at corporate computer users.
 
There’s several reasons for the enterprise focus. Flash, though much more expensive than disk drives per bit of data stored, is much faster, uses much less energy and has reliability advantages because there are no moving parts. Both longtime makers of storage systems and startups have been developing new devices to work in or alongside of servers, in some cases combined with disks.
 
WhipTail makes systems that use nothing but flash. Dan Crain, its chief executive, says the company already has more than 150 customers. Many are in businesses where speed is important, he says, like media companies that transcode digital movies from one format to another or Wall Street and healthcare firms that want to reduce the time needed to send out large batches of data to regulators.
 
The latest funding round brings the total WhipTail has raised to $41 million, which is pretty economical these days for a hardware company that has been shipping systems since 2010. “We are very thoughtful about what we spend on,” Crain says. “We are a little old-school.”
 
WhipTail and SanDisk say their relationship goes beyond funding. For one thing, SanDisk-built SSDs are expected to find their way into WhipTail products, they say.
 
More broadly, Sadana says SanDisk’s investments in WhipTail and others it expects to make in the enterprise flash sector will provide intelligence about what end customers are seeking and other market trends.
 
“Our goal is to deeply understand how flash is used in these systems,” Sadana says. The venture fund “allows us to get really intimate with the customers we intend to serve.”
 
Besides the corporate contributors, Ignition Partners, RRE Ventures and Spring Mountain Capital joined the funding round and Silicon Valley Bank provided debt financing, WhipTail says.
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