No IPO Yet, Storage Provider Nutanix Raises Another $101M At A $1 Billion Valuation

Nutanix has raised $101 million in a Series D round and is boasting of a $1 billion market capitalization. But the fast-growing enterprise storage company is not planning to pursue an IPO any time soon even though it has been hinting at one since 2012 when it raised $33 million. The company will now wait until it has a $2.5 billion to $3 billion market capitalization, said Nutanix CEO Dheeraj Pandey in a phone interview last week. Investors would prefer to wait and get a larger return than what they could now with a lower market cap. No timetable for an IPO  has been set.

Riverwood Capital and SAP Ventures led the funding round. Morgan Stanley Expansion Capital and Greenspring Associates also participated as new investors. Existing investors Lightspeed Venture Partners, Khosla Ventures and Battery Ventures also participated in the round. Nutanix has now raised a total of $172.2 million.

Founded four years ago, the company claims it has the growth of a company like Sun Microsystems in its early years. It is banking on the shift in a market now dominated by the cloud, cheap commodity hardware and a spreading app and mobile culture. Its technology relies a lot on software to manage its Flash storage, which gives customers the capability to manage large data loads with corresponding high-performance.

The converged infrastructure market is growing rapidly as hardware becomes more of a commodity and the storage, compute and networking gets integrated into single devices. Nutanix has leveraged the demand for cheaper, more efficient systems by wrapping that storage into commodity x86 servers, helping reduce the space needed for big box storage attached networks (SAN) and networked attached storage (NAS) environments.

Traditional storage appliances are merely a black box, dual controller devices that communicate with servers 3 or 4 hops a way, said Dheeraj Pandey, CEO of Nutanix  in a phone interview. Nutanix bring storage intelligence into the server and combines it with compute power to create an app centric infrastructure. By leveraging the two, a company can push out apps without having to integrate across multiple boxes.

“We are building web-scale architecture for the masses,” Pandey said. “How do you meld the public and private cloud — that is a huge issue.”

The issue is not lost on the entire cloud market, wich is also pursuing this hybrid approach that leverages a service like Amazon Web Services (AWS), integrating it with a corporate data center. The demand for cheaper, higher performance cloud services has lessened the need for corporate data centers that are stock full of expensive hardware designed primarily for the age of IT and not the new mobile era that is now full upon us. As a result, there are dozens of companies that are now pursuing the converged infrastructure market. Dell, IBM and EMC are just a few of the giants playing in this space.

And so Nutanix needs a big bank of cash to aggressively take on these multi-billion dollar companies while at the same time not also falling prey to the deeper commoditization of the server market. To keep that edge, Nutanix will invest in broadening its technology, for example, to offer a deeper analytics capability.

Expect Nutanix to continue to differentiate while following the VMware model. VMware successfully introduced virtualization into the IT world by making it transparent to the end-user while also making the most of physical servers. The same need for simplicity exits today as more companies embrace a hybrid approach. New interfaces are required to bridge different infrastructures. But the end-user does not care about the challenge of integrating the public and private cloud. They just want their apps to work. And IT wants more from the vendor.

And so that puts Nutanix in a good position but also one with its challenges. They have to innovate by making an app infrastructure possible for the end-user. But they also have to satisfy IT, which will want premium features such as the ability to run a data-driven enterprise.