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Spell Sepaton backwards three times ... Puff! It just vanished into HDS

Exit at last for high-end deduper's VC backers

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Hitachi Data Systems (HDS) has bought Sepaton, the highest of the high-end enterprise deduping backup targets. Sepaton used to have a rewarding deal with HP until the StoreOnce came long.

The news was announced in a blog post by Sean Moser, a senior veep for HDS' global portfolio and product management.

Sepaton will be run as an independent subsidiary.

HDS calls it "a leader in incredibly fast, scalable, and cost-efficient purpose-built backup appliances (PBBA)." Gartner's magic quadrant for deduping backup appliances suggests otherwise: Sepaton is positioned just over the boundary from the niche vendors into the visionary's category, well behind Exagrid and nowhere near the leaders' quadrant. But Sepaton (turn it backwards and its name spells No Tapes) must be a good fit for HDS.

HDS says the acquisition "is part of a larger data protection strategy that offers enterprise customers comprehensive data protection that is scalable and integrated." Further Moser says: "This acquisition better enables us to help our customers reduce the cost of protection, enable more data to be protected against disaster, and offer greater flexibility in where or how it is protected."

He adds that "Sepaton and HDS have partnered for many years, and have a number of mutual customers." The PBBA growth prospects are good; IDC reckons its compound annual growth rate (CAGR) is 19.2 per cent to a $5.3bn market in 2015, according to Moser, who neglects to reveal that CAGR's start date.

Sepaton has some 3,000 customers and that number should increase, HDS reckons, with its channel pitching the Sepaton message to its customers. HDS also wants to extend Sepaton's tech: "We intend to leverage [the Sepaton] team to aggressively develop next generation solutions that will integrate with other HDS assets, such as storage and copy creation, and management software, to help customers reduce their capex."

How much did HDS pay? It isn't saying. epaton was founded in 1999 and its total funding is said to be $98m. The funding history looks like this:

  • May 2000 - A-round for $8m
  • May 2001 - B-round for $10m
  • 2002 - C-round for $7m
  • March 2004 - D-round of $23.5m
  • April 2007 - E-round of $22m
  • April 2009 - F-round of $15.5m
  • August 2010 - G-round (so-called B-Series) with undisclosed amount
  • September 2013 - $2m

So Sepaton has taken in $100m-plus over 14 years; it hasn't been an overnight success as a VC-funded venture, to say the least. We'd assess that, since it needed a $2m top-up in September last year, it was not sold for the classic VC-payout multiplier of 5x.

We'd plump for roughly a 2.5x payout and assume a price of up to $250m and probably less.

It's possibly a coup for Mike Thompson, Sepaton's CEO and president since February 2011, but maybe the investors just got tired and wanted to get out.

HDS' announcement strategy is different. It hasn't issued a press release, just the Moser blog. The news is blazoned across the home page on Sepaton's website and mentioned as a subsidiary item on HDS' site with a link to the Moser blog.

It gives HDS, which acquires companies shrewdly, a nice, high PBBA gap-filler and they may extend the product down-market. We'll see. ®

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