Friday, January 3, 2014

Storage Investments in 2013

The investments statistics in the storage market for 2013 are out. There has been the same number of merger and acquisition deals as in 2012, namely 25, for a total of $9.5 billion. The median deal size for 2013 was $110 million, with a price to revenue median of 5×. Seventeen of the transactions were technology focused (median size $98, median P/R 6×) and eight were business focused ($214 million, resp. 1×).

As for venture funding in storage, there has been a slight decline from $978 million in 2012 to $955 million last year. These investments consisted of 43 rounds of $22.2 million average size. The second half of the calendar year was particularly strong with $249 million in the 3rd quarter and $249 million in the 4th quarter.

Both Seagate and Western Digital introduced very competitively priced high quality data center grade 4 TB hard disk drives. Solid state drives (flash memory) has become much faster by moving from the SATA to the PCI interface, while prices kept coming down. When you are bound by I/O rate and durability, flash memory has become less expensive than hard disks.

While storage drives have become very inexpensive on a per TB price, business people have learned the virtues of data mining, now called big data analytics. This combination of low storage price and new analytic skills is prompting organizations to retain more of their data and harvest it. Data has become the new gold.

Just having petabytes of data is not very useful: you have to be able to access and deliver it. This is not straightforward and this is why so much investment is occurring in the storage industry. Those who can solve the data access and delivery problem will be the ones building long lasting successful businesses and are receiving the investors' attention.