Turbulent Times Warrant A Cautionary Tale

Kevin Wiggen and Barry Lind sat out the dot-com boom, but they sure look smart now. While colleagues and even competitors were raising hundreds of millions of dollars in venture money, Wiggen and Lind passed on the opportunity and bootstrapped their company, Xythos, on credit cards.

“We wanted to build a software company, not a storage service provider,” says Wiggen, who cofounded Xythos after leaving Oracle. “We came from the ERP world—we knew how to release, patch, upgrade and internationalize software.”

Some of those flashy storage service providers (SSP) are crashing as fast as they rose, but Xythos—a plain, old enterprise software company—is thriving. The company provides a software layer called WebFile Server (WFS) that is based on WebDAV, an extension of the Webs HTTP protocol. WFS sits between storage and applications and lets people not only read files, but also collaboratively edit and manage them over the Internet.

The company recently raised $6.3 million in funding and scored office space on San Franciscos exclusive Maiden Lane, where the exodus of dot-coms has driven rents down to the point that Xythos decided they were affordable. “Every month we watched them fall,” Wiggen says. “In April, we moved in.”

Xythos is, of course, walking a tightrope. Its about two steps ahead of Microsoft and Oracle, which are building support for WebDAV into their own servers. But Wiggen figures the giants will try to lock customers into their respective platforms while Xythos will remain neutral. It will work with systems integrators, which can extend WFS in numerous ways, and with standards-based storage providers like Sun Microsystems and EMC. It is pushing version 3, which came out this month, to data centers as a way to sell additional services.

“On bad days,” says marketing VP James Till, whose last job was at one of those SSPs, “I remember how big the market for storage is going to be.”

One of Xythos customers, Eazel, has not fared so well. As Eazel VP Brian Croll feared, the company was indeed shut down after failing to attract a second round of funding. Its file manager/ browser for Linux, called Nautilus, was turned over to the open-source community, and its online storage service was discontinued. Croll, who spent several years at Sun before joining Eazel, doubted that throwing Nautilus into the open-source community would ensure its survival. But Eazels demise has led to a long debate on Slashdot.org, a Web site where open-source programmers hang out, on whether Eazel should have been funded at all.

Several readers felt that Eazel should have waited to seek funding until its software was more usable. Eazel received $11 million in April of 2000, just as the bubble began to burst, and in different circumstances might have been more like Xythos.