Wasabi vaults to unicorn status with $250M in new funding

Wasabi vaults to unicorn status with $250M in new funding

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When it comes to cloud storage, simplicity apparently sells. Wasabi Technologies Inc., which sells low-cost storage-as-a-service based on a simple pricing model, said today that it has secured $250 million in new funding.

The funding includes Series D equity financing of $125 million and a $125 million expansion of its existing debt facility. It brings the total amount of cash the company has raised to more than $411 million and establishes it as the newest “unicorn” company, with a valuation of more than $1.1 billion.

Founded in 2015 by longtime business partners and serial entrepreneurs David Friend (pictured) and Jeff Flowers, Wasabi provides cloud data storage worldwide at roughly one-fifth the cost of large hyperscale providers with no usage surcharges or tiering. The three big hyperscalers all charge customers “egress fees” for downloading their data or transferring it to other cloud services, a practice that has irritated some customers. In contrast, Wasabi charges a flat fee of $5.99 per terabyte per month with discounts for customers that commit to multiyear agreements and no egress fees.

Challenging environment

The size of the funding round is notable in a market that has seen technology stocks hammered this year, with the valuations of some falling more than 80%. “It was probably the most challenging fundraising I’ve done in my career,” said Chief Executive Friend, who estimated he has led about 30 funding rounds with previous startups.

Despite global recessionary fears and signs of pullbacks in information technology spending, Friend said the time to double down on Wasabi’s business is now. “This is a one-time opportunity to capture data as it migrates from on-prem to the cloud,” he said. “Once people move their data somewhere it tends to stick. I want to get as much of it as possible over the next five years.”

Wasabi was an early mover in the cloud storage market and was the only company included in International Data Corp.’s 2020 MarketScape for U.S. public cloud cold storage services that doesn’t also sell cloud infrastructure. New competition has recently emerged from companies such as Cloudflare Inc. and Seagate Technology Holdings PLC, but Friend said his company’s network of 13,000 partners and 13 storage regions gives it an advantage.

“Once you tie up the channel they aren’t interested in carrying two products that do the same thing,” he said. “When we move into a new market, the first thing we want to do is tie up the most important channel partners. Once they’ve already integrated our billing systems and so forth it’s not likely they’ll want to change things up to do something similar” with a competitor.

Global expansion targeted

Much of the new funding will go to support regional expansion on top of the data centers the company has added in Toronto, London, Paris, Frankfurt, Sydney and Singapore over the past nine months. Friend wouldn’t speculate on the target locations for new data centers but the four most recent launches were all in the Asia-Pacific region.

“It’s an aggressive expansion plan but the payback is going to be phenomenal,” he said, adding that the goal is to eventually see about one-third of revenues come from North America, Europe and Asia, compared to the U.S.- and European-centric revenue mix today.

Wasabi also aims to expand its channel partner network, believing it to be the source of long-term competitive advantage. “We’re a channel-focused company because most people buy storage in conjunction with something else like backup,” he said.

The company will continue to compete on cost — it claims it can undercut Amazon Web Services Inc. S3 pricing by 80% — and simplicity, which is a combination of the approaches that were successful for EMC Corp. and Carbonite Inc., a previous Friend/Flowers venture that sold for $1.4 billion to OpenText Inc. in 2019.

Carbonite stressed simplicity, with a flat fee for unlimited backup. EMC started out by undercutting IBM Corp.’s storage pricing by half and then evolved into a technology leader as it overtook its rival.

“Most people thought EMC was crazy for trying to compete with IBM, but they were less than half the price and people decided to give it a try,” Friend said. “We have performance benchmarks that show us pulling further and further ahead of AWS. Our architecture is inherently faster than theirs, which was designed 15 or 16 years ago.”

The $125 million Series D equity funding was led by L2 Point Management LLC with participation from Cedar Pine LLC and returning investors that include Fidelity Management & Research Co. and Forestay Capital SA. The debt facility is held by MGG Investment Group LP.

Photo: Wasabi

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