Storage Startup Candera Calls It Quits

 
 
By Karen Schwartz  |  Posted 2004-12-14
 
 
 
Sometimes even the best-laid plans go awry. Nobody knows that lesson better—at least this week—than the founders of Candera Inc.

Despite raising more than $59 million in funding from several venture capital firms and having a good idea, Candera began experiencing problems earlier this year when founder Nilesh Shah left the company, followed by vice president Duke Lambert.

The Milpitas, Calif. startup, which offered an enterprise-class network storage controller both by itself and combined with ATA RAID disks to create an intelligent tiered storage SATA (serial ATA) appliance, simply couldnt keep pace with market demands and trends, experts believe.

The demise of Candera was due to a combination of factors, including underestimating the competition and its inability to roll out a 4G product in a timely fashion, said Michael Karp, senior analyst at Enterprise Management Associates of Westboro, Mass.

"To succeed as a storage startup today, you have to be properly capitalized and technologically accomplished in a way that can be measured favorably against all of your competitors," he said. Candera had the former, but perhaps not the latter, he said.

The product Candera was counting on to propel it forward, the Candera ATA intelligent tiered storage SATA appliance, probably was too expensive to develop using an intelligent switch as the controller, noted Randy Kerns, a senior partner at Evaluator Group Inc. of Greenwood Village, Colo.

Compounding the situation, the appliance lacked crucial functionality that would have made it more competitive, he said, given the amount of competition for this type of product.

"Its really simple market dynamics," Kerns said. "Candera may have misjudged the conditions."

Click here to read about Candera targeting the midmarket.

Canderas collapse should serve as a warning to IT managers evaluating vendors, Karp said.

"Its about understanding the business viability of the vendor youre considering. If the company has been around for a while, you can be fairly sure it will be around in the long run, but if youre looking at a startup, you have to evaluate them carefully," he said. "As an IT manager, you have every right to ask them where they will be in two years. Many companies dont do that, and thats why they get stung."

But dont let the risk in going with a startup deter you from going that route if the product and the company fit the bill, Karp said.

"Just because a company is a startup shouldnt disqualify them from your consideration. Because they are small and limber, startups can get things done very quickly and can be very responsive to their customers," he said. "But look at these companies carefully. You arent making just an IT investment, but a business investment. Storage is in every sense a strategic purchase."

Canderas demise says more about sizing up the competition and keeping pace with technology than it does with the state of the SAN (storage area network) market in general, Kerns said.

In fact, the SAN market overall is maturing very well, with new functions enabled in the fabric starting to be delivered by several vendors. SAN implementations also are beginning to push down from enterprise data center environments into the middle tier, he said.

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