ExaGrid Pulls in $20 Million Series C Round in Bid to Replace Tape-Based Backup

11/8/07Follow @wroush

Magnetic tape may seem so 20th-century in an era when a single iPod Classic can carry 160 gigabytes of data on its tiny hard drive, but tape is still a key technology in the world of corporate data management, where it’s a cheaper way to store large volumes of data over long periods than disk drives. Lately, though, disk technology has begun to overtake tape even for some corporate backup applications. ExaGrid, of Westborough, MA, is one of the companies making disk-based backup more economical, and the company announced today that it has pulled in an additional $20 million in Series C funding to help it market its backup servers more widely in North America, Europe, and Asia.

ExaGrid, founded in 2002, makes disk-based servers that hold from 1 terabyte to 5 terabytes of data. (A terabyte is 1,024 gigabytes. ExaGrid’s name leaves the company plenty of room to grow its technology: an exabyte is 1,024 x 1,024 or 1,048,576 terabytes.) By yoking together four 5-terabyte servers, customers can buy up to 20 terabytes of backup space—and thanks to the servers’ built-in compression and “de-duplication” algorithms, that 20 terabytes can function in place of even larger backup systems.

(For the nerds among you, it works like this: ExaGrid’s devices keep a full copy of the most recent backup, compressed to about half its size. Older backups are de-duplicated, meaning that everything is erased except for the information that changed from copy to copy—usually about 2 percent of the data, according to the company. So, say your company has a 20-terabyte data set and makes weekly backups. A 20-terabyte ExaGrid system could store a full copy of the most recent version of the data set, and would still have 10 terabytes of space left over, enough store about 50 weeks’ worth of older backups.)

“Tape is cheap; disk-based storage used to cost 50 to 100 times more,” says Bill Andrews, CEO of ExaGrid. “But about four or five things have changed to finally get disk-based backup down to where it’s only about 30 percent more expensive than tape, instead of 10,000 percent.” In addition to the development of efficient compression and de-duplication algorithms, which cut way back on the amount of data that needs to be stored, Andrews cites the advent of low-cost “serial ATA” or SATA drives and low-cost business servers based on processors such as Intel’s Xeon 2.

ExaGrid targets small enterprises with 300 to 10,000 employees and between 1 and 60 terabytes of data to back up every week. The company says its sales have been growing at about 40 percent per quarter since the fourth quarter of 2005 and that it’s gaining ground against competitors such as Data Domain and Quantum among key customers in areas like healthcare, financial services, manufacturing, and the federal government.

The lead investor in the $20 million round is New York-based Lehman Brothers Venture Partners, the venture capital group of global investment bank Lehman Brothers (NYSE: LEH). Also on board were Highland Capital Partners of Lexington, MA, and Sigma Partners of Boston.

“ExaGrid’s unique approach to disk-based backup with post-process byte-level data de-duplication and a grid-based architecture for scalability is clearly giving customers what they need as they move from tape to disk for backup,” Lehman Brothers managing director Brian Paul said in a statement. “We are excited to participate in the company’s ongoing success.”

ExaGrid has 91 employees and has raised a total of $65 million since its inception. Andrews says the new cash infusion will be used to double the size of the company’s sales and marketing operation. “We’ve got product, the pedal is to the metal, and we win far more than we lose” against competing backup providers, he says. “It’s all a sales and marketing game now.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush