Escape Velocity

What does it take to build an SSD company into a sustainable enterprise? What does it take to make it profitable? What does it take to go public? Given that many of the SSD companies focused on the enterprise are private, it is awfully hard to get good data on the costs of entry.

As a participant in the SSD industry for the last decade, I have had the benefit of watching the ascent of Fusion-IO from a small start-up company to a marketing machine and can now observe along with the rest of you their attempt to go public.

Say what you will about Fusion-IO and their products, and believe me at various times I have said all of those things good and bad, they are a marketing machine. But to leave it at that would be a terrible injustice. David Flynn and his team launched a product that the rest of us did not see the need for. Don’t get me wrong, Cenatek and MicroMemory both had server-based PCI SSDs well before Fusion-IO, but Fusion-IO did two things that really set their product apart 1) they were the first PCI SSD company to really take advantage of the first generation of Flash suitable for enterprise customers; 2) they were unashamed about beating their way into the enterprise market even if they took what I consider a fire:ready:aim approach to marketing. I remember the early days of Fusion-IO marketing which was clearly aimed at companies using storage area networks. The ad went something like “the power of a SAN in your server”. Interesting concept, but the people who used storage area networks were pretty sure that a PCI card was not about to replace their SAN. I know, some people have done this but by and large I would suggest that what Fusion discovered and now markets to directly is the large set of customers that need server-based application acceleration. These scale-out applications include those run at customers like Facebook who improve application performance by adding servers. Historically, those servers would be laden with expensive high-density RAM. Fusion-IO brought them a product that was not cheap, but less expensive than RAM. The other sweet spot that Fusion discovered was that this market was very read-intensive and good therefore to use MLC Flash enabling the customers to get better density and better pricing.

I remember the first time I met David Flynn. I was participating in a SNIA Summer Symposium in early 2008. Until this point, my only real exposure to Fusion-IO had been from their marketing. When the topic in the room turned to Flash technology, David was quick to join the discussion and showed a grasp of Flash that clearly exceeded that of most of the people in the room. From that point, I knew that Fusion was much more than marketing.

At one point during my time at TMS I tried to assess what it was that made Fusion-IO go from yet another random company involved in SSD to a company that was always in the limelight (disproportionately to their revenues – another hallmark of good marketing). I used Google trends data to see if there was an inflection point for Fusion-IO and I found it. The inflection point was their hiring of Steve Wozniak. What a brilliant publicity move and one that I think continues to pay off for Fusion-IO. From the day his involvement with Fusion-IO was announced, the company took off in terms of web hits. I can’t tell you how much time, because it would be embarrassing, but I spent a lot of time trying to figure out how to create a similar event at TMS. I thought if we could hire “Elvis” we would have a chance.

The next brilliant tactical move by Fusion-IO was tying up the server OEMs. You see, one of the biggest challenges with selling products that go into another manufacturer’s servers is getting that server vendor to bless and support the solution. Fusion realized this problem early on and announced relationships with HP, IBM and Dell. Not to mention that Michael Dell was an investor. The big problem was solved with the announcements, the big server vendors had blessed Fusion-IO with credibility typically reserved for companies like Seagate and Intel. It is worth noting that these server vendors hate single sourced products leaving plenty of room for competitors to get the same blessings.

Plenty of things good and bad have happened along the way for Fusion-IO. They encountered many of the problems that fast-growing venture backed companies have. There were delayed product releases, there were quality problems, Fusion’s approach to business created a lot of enemies, they went through an impressive number of CEOs (though David Flynn remained the key guy all along) and sales teams, and there were missteps in channel marketing strategy but through it all they have shown impressive perseverance.

As Fusion’s revenues have grown in the last two years to match their marketing, they have added some really impressive depth to their team. Marius Tudor who largely led the sales & marketing efforts for industry pioneer BitMicro is involved. Another marketing genius, Gary Orenstein who led marketing at Gear 6 among other places has joined the team. This is not to imply that I don’t have deep respect for their Chief Marketing Officer Rick White, another gaming enthusiast like myself, but really, does he need this much help. Leaving behind some marketing talent for the rest of the industry would have been gracious.

For the SSD vendor community, whatever you think of Fusion-IO, their effort to go public is a major milestone for the industry. Have you ever tried to get private company valuations without comparables? Valuations become guesswork. Do you have a great SSD idea and need VCs to get excited about it? Fusion-IO successfully going public would help the rest of the private companies eying their own exit strategy (going public, staying private, being acquired). What does it take for an SSD company to go public? What revenue, what profitability, what gross-margins? We may soon find out. In this pursuit, I for one am rooting for Fusion-IO and in turn the industry.

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7 Responses to Escape Velocity

  1. Woody – congratulations on yet another interesting SSD article

    My own view – re Fusion-io and their leadership position in the futurological SSD success charts – is that it’s rare to find people who really understand the solid state storage market potential and can navigate a viable business plan which navigates to that future.

    There are probably less than 10 in the whole world who really get the technology – or the market.

    Some companies I know – are lucky to have 1 such person. Usually it’s a technologist. Sometimes it’s a sales person or marketer.

    Fusion-io have 2 such people. As you said – David Flynn (technology and architecture) and Rick White (marketing barriers terminator).

    They spotted a gap in the market – which was clear many years ago – that one day server oems would want to get into the SSD market and it would be safer for them to badge engineer a 3rd party product.

    What’s unique about the Fusion-io technology (and it has its weaknesses as well) is that if a server oem builds a bunch of SSDs which sit on the shelf for 90 days – and then launch a new server which is 10% faster – the same old SSD works faster too. And they built in a bunch of hard to beat reliability and cost efficiency features too.

    No product is perfect, however, and in my view these products are not so attractive when they are used in older servers – because they rely on the host CPUs to do nearly all the work. That market segmentation is something I wrote about -www.storagesearch.com/enterprise-ssd.html – and called “Legacy versus New Dynasty”

    Fusion-io’s technology gives the server oem a degree of personality control over the SSD. They can adjust many parameters by tweaking software in the driver and in the OS.

    Re many oem partners… If Fusion-io had made the same business mistake that STEC did – by initially offering exclusivity to EMC – then they would be at risk of being stalled.

    But Fusion-io started out with the idea of getting many companies to adopt their technology. And by using a small number of impressive end-user internet customers they proved that their technology worked and could generate revenue.

    There are many other huge opportunities and alternate routes to success in the enterprise SSD market – but it always starts with an idea in the mind of someone who sees a new way of shuffling the semiconductor memory dice.

    • appicu says:

      Zsolt,

      I always appreciate your comments. Your notes add some real depth and a unique perspective to the story. There is alot for startups and existing companies to learn from these discussions.

      Woody

  2. […] What does it take to build an SSD company into a sustainable enterprise? What does it take to make it profitable? What does it take to go public? Given that many of the SSD companies focused on the enterprise are private, it is awfully hard to get good data on the costs of entry. Read on here […]

  3. Very interesting blog to me, the depth of insights on SSD industry that I rarely see elsewhere. Looking forward for next posts…

    Regarding the post: I think that FusionIO did a lot of fine engineering too and went far beyond being a marketing machine (which they got right also). Take any of their product, it is finely engineered piece of tech… and on all levels. Hardware part: excellent mechanical design, especially the Octal series products. Visually appealing too (or may be I’m a techno-fetishist ;)) . Then comes the software part: they couldn’t rely on existing storage stack and implemented their whole stack on their own and it was implemented rather well… Then it goes to accelerating DBMS, full information is publicly available on both IOPS-intensive and throughput-intensive benchmarks (TPC-C and TPC-H). Last but not least, they were always open and forth-coming about their technology, no secrecy-bullshit.

    So while they really were a marketing machine it never came to counterbalance lame engineering.

    • appicu says:

      Camuel,

      Thanks for the feedback. I am becoming increasingly interested in big data, perhaps we can exchange notes sometime. I think all of your comments on the hardware design and firmware are accurate. Fusion-IO makes some interesting design tradeoffs with their architecture. I think I can safely say that these trade-offs work well for some customers and poorly for others. The good news is that the market is very active today and customers can easily compare architectures and results as they decide which type of SSD to deploy.

      Woody

  4. Dan Porat says:

    Woody ,

    Extremely impressive post.
    As a member of “one of those startups” I can just stand amazed at your good insight of Fusion-IO’s success.

    Way to go and looking forward to read your future posts.

  5. Tan Tran says:

    Woody,

    Great article! I believe your message will definitely help a lot of people when it comes to deciding what type of SSD to buy and where they can properly implement it. SSD companies can certainly learn from Fusion IO’s business model if they want to stay in business. I look forward to your future post.

    Tan

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