Evaluating Purchase of Storage Systems from Start-Ups – – Storage Soup Blog

By , Monday, August 8th 2011

Categories: Analyst Blogs

Startup companies will innovate and bring a unique to product to market that can have high value for customers.  The product may fit a specific need or solve a problem in a unique and economic manner.  These innovations need to be encouraged and success is measured in sales of the products.  Eventually these products and the technology may be acquired by a larger company but it is during the initial go to market by the startup that is the most critical phase.

For companies that want to take advantage of the innovations by startups, there are a few things to consider.  There is always a risk in buying a product from a startup but the risk can be reduced by evaluating the startup company – beyond the evaluation of the advanced product.

1.    Look at the experience that the senior staff has.  Have they brought a storage system to market before?  Have they worked at that senior level previously?  Has the leadership of the company done a startup before?  There’s no substitute for experience and in a startup, there are things to be learned that cannot be learned within the environment of a large company.  Bringing a storage system to market and putting the infrastructure in place for support are incredibly complex.  Only if they have done it before will the senior staff understand the requirements.

2.    Does the startup have the funding necessary?  Many times the startup will be funded by venture capital companies and will only be given enough funding to reach the next milestone.  Some of the VCs have a template of how they think a startup should progress.  That template is based on the last successful startup they are familiar with (there may not even be a relationship for the type product unfortunately) and put a sequence in place to mirror that startup.  If the startup has a different development or delivery sequence than the template, the VCs may withhold funds, change the management, or just not continue funding because they don’t believe they will get the expected payback.  If the startup has enough funds to deliver the product and continue support, then that risk is alleviated.

3.    Has the support structure been set up?  Are the multiple levels of support available and is it staffed?  What is the availability of on-site support and the coverage?

Do their board members have a storage background?  Storage has very critical requirements and cadence of how and when customers purchase storage.  If the board that is usually assigned by VCs does not have a storage background, there may be some directions taken that are not optimum and can jeopardize potential success.

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