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Storage shop ParaScale shrinks itself

Reconfigured after failed B-round

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Cloud file storage supplier ParaScale has failed to raise funds in a B-round and is having to cut costs and conserve its dwindling cash.

The company has cancelled its external PR contract and an unspecified number of people are to leave the company. This includes Marketing and Business Development VP Jack Norris, who was just appointed in November of last year. It must have been a roller-coaster six months for Norris.

ParaScale was started up in 2004 by Cameron Bahar, its current chief technology officer. The company secured $11.37m in June 2008 in an A-round of funding led by venture capital firms Charles River Ventures and Menlo Ventures. At that time John Jarve, a Managing Director at Menlo Ventures, said: “The team, the cloud storage opportunity, and the software-only business model were very attractive to us, and their technology is truly disruptive. With ParaScale’s offerings, content owners can easily roll their own cloud, and service providers can deploy massive cloud storage offerings without needing a large IT team to manage it.”

Menlo had previously invested in Spinnaker Networks, which developed clustered network-attached storage (NAS) technology. That firm was acquired by NetApp and its technology is in the current ONTAP 8 offering. It is thought that NetApp is going to announce an enhanced cluster offering later this year.

Two years after that A-round, ParaScale has no fresh source of funding. The company now has to cut its costs, likely in a quite savage way, to conserve what cash it has left and to buy time to come up with a revised business plan. If the funding shortfall is serious enough, the company may even have to put itself up for sale.

ParaScale offered cloud NAS software which loosely clustered Linux boxes into a cloud NAS resource with lots of scalability. It was positioned as being appropriate for secondary NAS data, not highly-active, tier-one NAS data.

There was, it seemed to us, a marketing-definition problem here, as the very idea of NAS is cloud-like. We wrote that version 2 of the product, announced in November of last year: "provided better support for virtual servers, REST and SOAP protocols, synchronous replication, a degree of self healing, and additional pricing models for variations of cloud type."

ParaScale's CEO, Sajai Krishnan, was suddenly replaced by Ken Fehrnstrom in April — often a sign of a switch in strategy due to poor business results.

The next month the company announced that applications could run directly on storage nodes to process data faster. This seemed odd, as it appeared to turn cloud NAS into direct-attached storage. Were the applications executing with that data now running in the cloud? If it was a private cloud, then what was the difference between this and traditional applications using directly-accessed local files?

The marketing messages around this v2.5 release talked of dealing with machine-generated data such as telemetry, satellite images, backups, and log files, but it didn't make it at all clear why these applications need ParaScale software rather than any other suppliers' NAS.

This v2.5 release did not represent a changed direction, in our view, as the release would have been in preparation for months before.

Everyone with whom we have spoken says the ParaScale team were bright, clever, and hard-working, "a fabulous group of people", with Sanjai being "a phenomenal person."

El Reg thinks that NAS filers and software have been very effectively marketed and developed over the years with lots of good low-end offerings; solid midrange and enterprise offerings from suppliers such as NetApp and EMC, which are pushing their products to cloud service providers; and good extreme, high-end NAS products from BlueArc, Isilon, Panasas, and now IBM with SONAS, also HP. There are also good filer accelerators from suppliers such as Avere and Symantec.

Against this background, where is the gap in the market that ParaScale can detect, exploit with new technology in a sustainable way, and market in a distinctive and comprehensible fashion? The failure of the B-round suggests that potential sources of funding thought that the market gap was too small to permit ParaScale to develop a sustainable competitive advantage with its new technology.

We asked for a comment from ParaScale but the company was not immediately able to respond. ®

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