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Cohesity funding nets $250M despite pandemic
After its latest funding round, Cohesity doubled its valuation in two years. It indicates how hot the backup market is as vendors add data reuse capabilities to their portfolios.
Even in these times of great economic uncertainty, data protection and data management are proving a hit with investors.
Cohesity received $250 million in Series E funding last week, bringing the company's value to $2.5 billion. This figure is more than double what it was two years ago.
Cohesity intends to use its new funding for research and development. Specifically, it plans to extend hybrid cloud capabilities in Cohesity DataPlatform, supporting more clouds and on-premises environments. Cohesity is also developing new ways for customers to make their data useful and productive and has plans to expand its data apps and services ecosystem.
Outside of R&D, Cohesity also said it would be using the funds to broaden its global reach and build on its relationships with its partners.
New investors DFJ Growth and Greenspring Associates led the latest Cohesity funding round, along with previous investors Foundation Capital and Wing Venture Capital. Baillie Gifford and Sozo Ventures are also new investors for this funding round. Strategic partners Hewlett Packard Enterprise (HPE) and Cisco Investments also contributed. HPE and Cisco sell Cohesity DataProtect software on their servers.
According to a Cohesity executive, the discussions with investors for this funding round started in late 2019, before the COVID-19 outbreak. Therefore, Cohesity's value and usefulness to customers in a world of increased remote work were not under consideration. Instead, investors were interested in the company's vision of simplified, unified secondary storage and the merits of the DataPlatform product.
The Cohesity funding round follows a big year for data protection vendors in 2019. There were at least four funding rounds of $100 million or more for data protection vendors last year. That includes a $500 million haul for Veeam and $261 million for Rubrik on consecutive days in January 2019.
Cohesity closed a $250 million Series D funding round in June 2018. Since then, it has completed its transition to a software business model -- integrated appliances are only sold through Cohesity's partners. Cohesity claimed this also translated to increased recurring revenue through subscription-based licensing and more adoption of Cohesity's cloud capabilities.
Cohesity has been considered a prime candidate to become a public company, but the Cohesity executive said it was too early to discuss an IPO.
Cohesity and competitors such as Rubrik and Actifio have extended their capabilities beyond simply backing up data to managing and deriving value from it as well. Secondary data reuse, or intelligent data management, has caught the attention of investors for the past few years.
Christophe Bertrand, senior analyst at Enterprise Strategy Group, said the data reuse is most interesting to investors -- they couldn't care less about how well a product performs backup. Customers want tools that make their data productive and useful, and venture capitalists and investment firms want to ride this wave. The fact that this funding closed in the middle of a global pandemic is validation of the trend.
"The real story is investors doubling the valuation of a company that started in backup and is evolving into intelligent data management," Bertrand said. "The space has been hot regardless of what's happening now."
Although the COVID-19 pandemic didn't impact this Cohesity funding round, Bertrand said it would be naïve to think companies aren't adjusting their plans. One of the big changes caused by the pandemic is the cancellation of live trade shows, prompting vendors to host virtual events instead.
Bertrand said it would not surprise him if Cohesity and other tech companies are recalibrating their marketing because they can no longer use events for lead generation. He expects that considerable investment is being made to make up for the lack of live tech conferences, even if companies aren't openly stating how much they are spending on it.
"Now is not the time to hold back on marketing," Bertrand said. "The rules are changing."