Coraid CEO speaks out over funding problems

Ethernet storage vendor tells CRN it is 'evaluating all options for maximising value'

Ethernet storage vendor Coraid has confirmed it has made deep job cuts after running out of VC cash.

In a statement to CRN, Coraid chief executive Dave Kresse said the California-based vendor's attempts to raise new capital over the last months had been unsuccessful to date.

"Accordingly, we have made the difficult decision to significantly reduce the size of the company while continuing to evaluate all options for maximising value," he said.

Coraid has raised $114.3m (£75.3m) in VC lolly in total, including most recently $29.3m in Series D funding in December 2013.

The situation appears to have come to a head swiftly, with Coraid's official Twitter account advertising vacancies for support and solutions engineers at the firm just days ago. UK staff also appeared to be unaware of the issues until the last 48 hours. Rumours that Coraid had hit the wall began to swirl across Twitter this morning.

Partners we spoke to had had no official communication from Coraid earlier this afternoon, but one told us his firm was "making preparations for the worst-case scenario".

"We spoke to one of the Coraid guys on Monday about the road map – he is now no longer in the employ of the company. He confirmed things have gone awfully wrong," said the partner, who did not want to comment publicly.

Several sources CRN spoke to had heard the vendor, which provides modular, flexible and large-scale Ethernet storage solutions, had burnt through the last of its cash.

John Thorpe, managing director of Millennia Computer Services, a former Coraid partner that stopped actively selling its solutions two years ago, expressed admiration for the technology but said it required a "paradigm shift" from the customer because they needed to develop a separate network to run it.

"I was certainly taken by their technology and the way they were redesigning how to talk over IP to storage," he said.

"For streaming data, it was very fast, but when it came to running VMs [virtual machines] it wasn't very good at all. We were finding that iSCSi was beating it in proof of concepts. Dell were smashing them into the ground on price and I think they may have been crowded out of the market."

Tony Lock, an analyst at Freeform Dynamics, said a combination of factors may have combined to floor Coraid.

"I suspect it was simply a good idea at the time that never found a good way to get to market," he said. "This is business. Some things you think should be great don't succeed and some things you think aren't do succeed. This is often a combination of timing, luck and good products, as well as having a good management and sales team. Maybe things just weren't right for it across the board."

Lock added: "It will be interesting to see what happens to the core customer base and how they move on and get support going forward - and whether it has a future as a company given the way the storage market is evolving."

Coraid's funding crisis comes just days after Citrix snapped up one of its competitors, storage virtualisation specialist Sanbolic.

One storage market onlooker said Coraid suffered from falling between two stools.

"It's a good product but it's caught between various sectors in the market," he said. "It doesn't quite compete with solid state as it's not quite quick enough, or the pure-play software-defined storage vendors, as they can offer so much more. It was sort of caught in no man's land."

Jonathan Lassman, managing director of storage VAR Epaton, said: "There are going to be a lot of start-ups in the storage space and people have to back the right ones – it's as simple as that."