ONStor sells for $25M, taking $105M in capital down with it

July 24, 2009 | Camille Ricketts | Comments | |

onstor_logo_nastag2 ONStor, the ill-fated maker of data storage equipment for enterprises, has sold to software provider LSI Corporation for about $25 million, a paltry sum compared to the $130 million in venture capital it raised since its founding in 2001.

The big losers in the deal are ONStor’s fairly prestigious investors, including Foundation Capital, Velocity Interactive Group, Mayfield Fund and Worldview Technology Partners, among others.

Signs of trouble arose in April 2008 when the Campbell, Calif., company yanked its IPO filing. At the time, the company said it was going to wait to hit profitability before pursuing a public offering — it seemed like the market was demanding profitability as a prerequisite. Clearly, when the downturn set in, locking up the exit market, these aspirations were swept under the rug.

But even before it started eyeing a potential IPO, ONStor was feeling the crunch of competition in the storage market. Just the year before, several major competitors like 3Par, Compellent, Data Domain and Netazza held successful IPOs only to see their stock prices drop immediately. And this before the economy started to slide. Interest in storage application developers hasn’t picked up since.

All of these factors probably contributed to the company’s low acquisition price. The bargain deal certainly makes sense on LSI’s side — the buy could go a long way toward strengthening its market presence and competitive edge. With ONStor’s technology in hand, it could rival network storage offerings from IBM and NetApp.

How exactly LSI plans to capitalize on the deal has not been disclosed, but it’s expected to reveal more during its earnings announcement next week.

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About the Author, Camille Ricketts

Camille is the lead writer for GreenBeat. She came to VentureBeat from Google where she worked on its traditional platforms team, particularly in TV. Before that, she was a reporter for the Wall Street Journal in New York and London. Follow her on Twitter at @camillericketts, and follow VentureBeat on Twitter at @venturebeat.

With GreenBeat 2009, VentureBeat's all-star conference on all things Smart Grid, coming up in November, Camille will be expanding coverage of this exciting space. Stay up to date by following @greenbeat2009 on Twitter or by becoming a fan of the event on Facebook here.

  • The KOD
    You might want to consider a richer story that lies underneath the failures of ONStor, 3Par, Force10, and other companies, Camille. What is the underlying theme behind all of those companies? Who was/were the investors common to all of those failed companies? what prompted those companies to file for IPOs even while their businesses were collapsing underneath? was it to prompt an M&A frenzy (that failed to materialize)? how are those investors doing with so many failures on hand? which of those firms went under or are going under? any specific partners at those firms that was more adept at bribing Forbes to be included in the "Midas list" even while accumulating blowups in his record?

    Tip: start with Worldview and Mike Orsak. Follow that to his links with Kevin Fong at Mayfield. Track the former's kiss of death touch that killed many companies. See which companies Oak, Mayfield, Worldview invested in (in some combination) and what happened to those companies. ...