The year is shaping up to be stellar for IPOs. And one sector that is likely to get a lot of attention from investors is cloud storage. In fact, storage company Box recently filed for an IPO. And it looks like Dropbox could as well.
So to get some insight on all this, I recently had a chance to talk to Alex Gorbansky, CEO of Docurated, which helps companies manage their cloud storage. Some of the customers include Netflix (NFLX) and Cox Media.
Alex actually founded the company with his wife, Irene. Both experienced the cloud storage business from different perspectives. Irene ran engineering teams at EMC prior to heading up the “disruptive innovation” team at American Express (AXP). As for Alex, he worked at Loudcloud and EMC before co-founding Frontier Strategy Group, an information services firm which provided large corporations with research on emerging markets.
When clients purchased research, their single biggest complaint was that they were already buried in information, and it was virtually impossible for them to extract the critical information they needed for internal presentations or meetings.
This extensive background has certainly proved helpful with Docurated. After all, the company recently snagged $3.75 million in funding, led by Rogers Venture Partners.
So here’s what Alex had to say:
Q: Can you give us some background on your company?
A: Docurated was founded on a disruptive vision: to make information buried in file- and folder-based repositories easily discoverable, usable, and valuable to everyone. Our solution is best described as “Google (GOOG) for your documents.”
Docurated connects to existing repositories and lets users instantly find and use the exact and most relevant slide, page, [or] chart they need without opening a single file or folder, and no matter where the information is stored. Unlike existing tools, Docurated does not require any manual tagging or administration. It also fully reflects existing permissions and access controls.
Q: Why all the interest in storage? Isn’t it a commodity?
A: The requirements of a global, mobile workforce include 24×7 access to information from any device and any place. As a result, companies are rethinking their strategies and are evaluating and investing in a new class of solutions that are more aligned with today’s requirements.
Document storage is a massive multibillion-dollar market that has been dominated by large legacy vendors and products and is therefore ripe for disruption. While the cost of document storage has been rapidly decreasing, the cost of information retrieval is growing exponentially for enterprises. Not only is the volume of content within companies doubling each year, but also, the number and range of document repositories has grown — creating additional complexity for users.
Existing folder-based file sharing and document management tools are only exacerbating the information retrieval problem: First, they create yet another information silo that users have to crawl through; second, users suffer from folder sprawl with any meaningful amount of content become the very cluttered file cabinet they were meant to replace.
Information is essentially the lifeblood of a business. Vendors that own the document storage layer in an enterprise control of a highly strategic part of the IT infrastructure. Solutions are incredibly sticky, difficult to replace, and horizontal, enabling vendors to have access to the entire corporate population.
Q: What about the IPO prospects for this year?
A: The biggest IPOs filings to watch this year will be Box, Dropbox, and Egnyte. While Box and Dropbox both play in the file sharing space, the two businesses could not be more different and it will be interesting to watch how the public markets value each. Box is an enterprise focused vendor and relies exclusively on a large direct salesforce to generate revenue. In many ways, its business model is very similar to those of existing enterprise vendors like EMC (EMC), Oracle (ORCL), and Salesforce.com (CRM).
Dropbox has taken the exact opposite go-to-market approach, relying on a viral product to spread with consumers and virtually zero direct sales until its recent expansion into the enterprise segment. As a result, the cost of customer acquisition for Dropbox has been highly efficient. But then again, questions remain about its readiness to play in the enterprise space. Box on the other hand, invests heavily in acquisition upfront but then recoups the costs over time through large enterprise deals.
Egnyte is not to be forgotten as a key player in the enterprise space. The company just raised a mezzanine round of financing with the expectation of a potential IPO in 2014 or 2015. It’s biggest differentiator is its hybrid architecture allowing customers to keep some content locally and some in the cloud.
With capital being a commodity, I expect the markets to value these companies based on the efficiency of their customer acquisition strategy. For every dollar invested, who can acquire more customers more efficiently? This will be a key question for potential investors in what is setting up to be an exciting year for the entire enterprise cloud storage industry.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.