Aiming for Third-Time Charm, San Diego’s Astute Networks Raises $12M

6/18/12Follow @bvbigelow

[Corrected 6/19/12, 10:25 am. See below.] San Diego’s Astute Networks, which reinvented itself almost two years ago by focusing on flash-based technology for accelerating virtualized computing systems, has closed on a $12 million Series B financing led by Samsung Investment Corp. The deal reflects the merits of the company’s new strategy, says Astute CEO Steve Topper, who likens raising capital for tech companies in San Diego to “trying to find water in the desert.”

Astute Networks was founded in 2000 as a fabless chip design company, but later shifted its focus to advanced telecommunications computing architecture as a manufacturer of blade storage equipment for telecommunications, aerospace, government and other “mission critical” markets. In the fall of 2010, the company again changed course to focus its business on addressing the performance issues that arise with network virtualization, a method for enabling network users to share computer resources much more efficiently. “We address the issues that arise with server virtualization and the I/O [input/output] needed to sustain performance to storage,” Topper says.

Steve Topper

[Clarifies and corrects terminology] Virtualization offers tremendous cost savings by greatly reducing the number of servers needed to run a business, and offers greater flexibility in the way computing resources are allocated to users in virtual networks. Topper estimates there are now 60 million virtual machines (desktops and servers) in the U.S., and he cites IDC projections of strong growth in the multi-billion dollar global market for solid state disc (SSD) technology.

But Topper says virtualization can pose significant challenges by penalizing network performance and bogging down user applications.

“Think of it as driving down a highway at 60 miles per hour, and you want to get off at the next exit,” Topper says. “But the off-ramp is where all the cars have lined up, and there’s just a huge, huge, funnel to get off the freeway. That’s the bottleneck that we address. We allow everyone to have sustained computing resources.”

Topper joined the company in October 2010, shortly after Astute Networks was recapitalized. Using proprietary technology the company had developed for its data storage equipment, Astute Networks developed technology that it calls a DataPump Engine to optimize the performance of virtualized networks by accelerating both data storage (iSCSI) and network (TCP/IP) traffic.The engine runs on a proprietary flash architecture in a series of network appliances that make up its ViSX product line, with unit prices ranging from under $20,000 to about $70,000.

“I got 100 percent benefit of a fully built and tested IP [intellectual property] that I didn’t have to spend a nickel to develop,” Topper says. “We’ve integrated it into a new user-based appliance without spending literally tens of millions of dollars in development.”

Whether the third time will be the charm is another question. Before joining Astute Networks, Topper was the founder of JumpStart Partners, a business advisory firm, and previously served as the CEO of Cerebra, an enterprise software developer in Carlsbad, CA; as an entrepreneur-in-residence at eCentury Capital Partners; and as CEO of New Hampshire-based Platypus Technology (a maker of solid-state storage systems) and other technology companies.

One advantage to the company’s strategy is that its technology is relatively non-denominational, and operates on VMware vSphere, Microsoft Hyper-V, Citrix XenServer, and Red Hat RHEV. “We know the VMware ecosystem, and focus on VMware because it represents 70 to 80 percent of the market,” Topper says.

“Our target customer is an organization that has virtualized the enterprise [network],” Topper says. “About 30 percent of enterprises have hit the glass ceiling in terms of deploying mission critical systems into virtualized networks.” The core market would not necessarily be small-to-medium businesses, he said, but rather mid-market and small-to-medium enterprise companies.

Including its $12 million B round, Astute has raised a total of $17.5 million since 2010. In addition to Samsung (a leading provider of NAND flash memory), current investors include Tallwood Venture Capital, Narra Venture Capital. Other new investors are Ayala Capital, ICCP Venture Partners, and The Investment Fund for Foundations (TIFF).

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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