Highlights:

  • Launched in 2015, Wasabi offers cloud data storage around the world at about one-fifth the cost of large hyper-scale providers with no usage surcharges or tiering.
  • Wasabi wants to grow its channel partner network because he believes it will give it a long-term advantage in the market.

When it comes to cloud storage, it seems simplicity is what people want. Wasabi Technologies Inc., which sells low-cost storage-as-a-service based on a simple pricing model, announced that it had received USD 250 million in new funding.

The funding includes Series D equity financing of USD 125 million and a USD 125 million expansion of its existing debt facility. It brings the total amount of money the company has raised to more than USD 411 million and makes it the newest “unicorn” company, with a valuation of more than USD 1.1 billion.

Launched in 2015, Wasabi offers cloud data storage around the world at about one-fifth the cost of large hyper-scale providers with no usage surcharges or tiering. The three big hyperscalers all charge customers “egress fees” when they download their data or send it to other cloud services. This has made some customers angry. On the other hand, Wasabi charges a flat rate of USD 5.99 per terabyte per month, with discounts for customers who sign multi-year contracts and no egress fees.

Challenging environment

The size of the funding round stands out in a market where tech stocks have been hit hard this year, with some losing more than 80% of their value. Chief Executive David Friend, who has led about 30 funding rounds for other startups, said, “It was probably the most challenging fundraising I’ve done in my career.”

Even though there are signs of a slowdown in IT spending and worries about a global recession, Friend said that now is the time to double down on Wasabi’s business. He said, “This is a one-time opportunity to capture data as it migrates from on-prem to the cloud. Once people move their data somewhere, it tends to stick. I want to get as much of it as possible over the next five years.”

Wasabi was one of the first companies to offer cloud storage and the only one to be included in the International Data Corp.’s 2020 MarketScape for U.S. public cloud cold storage services that do not sell cloud infrastructure. Companies like Cloudflare Inc. and Seagate Technology Holdings PLC have recently become new competitors. However, Friend said that his company’s network of 13,000 partners and 13 storage regions gives it an edge.

He said, “Once you tie up the channel, they aren’t interested in carrying two products that do the same thing. When we move into a new market, we first want to tie up the most important channel partners. Once they’ve already integrated our billing systems and so forth, it’s not likely they’ll want to change things up to do something similar” with a competitor.

Global expansion targeted

A chunk of the new funding will be used to help the company expand over and above the present data center in Toronto, London, Paris, Frankfurt, Sydney, and Singapore. Friend wouldn’t guess where new data centers would be built, but the four most recent ones were all in the Asia-Pacific area.

Wasabi wants to grow its channel partner network because he believes it will give it a long-term advantage in the market. Friend said, “We’re a channel-focused company because most people buy storage in conjunction with something else like backup.”

The company will keep competing on price — it says it can beat Amazon Web Services Inc.’s S3 prices by 80% — and ease of use. This is a mix of the strategies that worked for EMC Corp. and Carbonite Inc., a previous Friend/Flowers venture that was sold to OpenText Inc. for USD 1.4 billion in 2019.

Carbonite focused on being simplistic and offered unlimited backup for a flat fee. EMC started by undercutting IBM Corp.’s storage prices by half. As it grew, it overtook its rival to become a leader in technology.

“Most people thought EMC was crazy for trying to compete with IBM, but they were less than half the price, and people decided to give it a try,” said Friend. “We have performance benchmarks that show us pulling further and further ahead of AWS. Our architecture is inherently faster than theirs, which was designed 15 or 16 years ago.”

Series D equity funding of USD 125 million was led by L2 Point Management LLC. Cedar Pine LLC and returning investors like Fidelity Management and amp; Research Co. and Forestay Capital SA also took part. MGG Investment Group LP owns the debt facility.