Egnyte is a large enterprise, hybrid cloud storage startup. In a crowded, highly-competitive field (Nirvanix, Zetta), the company already claims over a million users throughout 30,000 paying companies. And they might grow much bigger very soon. Egnyte recently raised $16 million from Google Ventures, Kleiner Perkins Caufield & Byers, and Polaris Venture Partners. Financing isn’t the only story though.
About the funding, Egnyte CEO and co-founder Vineet Jain said, “I could have gone higher than $16 million. I’ve done this before, and didn’t want to go to big.” Sure, a lot of startups would be thrilled with any figure in the millions, but given that this is a Google deal… say again? Too big? Lesson to those looking to close big, early rounds of funding. The temptation might be to take as much money as possible, but doing so might be a mistake.
A short-term windfall doesn’t always translate into a long-term success. What if the company isn’t prepared to meet such enormous investor expectations? If you oversell yourself and fail, not only will you undo the good work that earned the attention of investors to begin with, but you will turn yourself into a riskier proposition in the future. A far better strategy is to choose appropriate investors rather than the most eager or generous.
Jain previously founded Valdero, a supply chain software solution provider. He was named the 2010 Storage Superstar and cited as an Emerging Storage Vendor by CRN magazine. Instead of thinking about the million on hands, he’s interested in turning Egnyte into a billion dollar venture. “We optimized the amount of money we took,” Jain notes, “and not at our highest valuation because Google Ventures offered us more than a bank transfer.”
The right investors. Your company might need much more than financial support. Egnyte now gets to partner with Karim Faris, who previously worked at Intel and Siemens. His experience across different stages of product development and marketing will no doubt help inform Egnyte’s growth. Jain doesn’t hide the fact that lack of awareness was a weakness for his company. Dollars always help, but the proper guidance to address shortcoming will ultimately add value to the company in the long run. In addition to Faris, the Gmail team has already led workshops on product design for Egnyte.
Not every company has the name or history of Google, but strong partnerships build credibility. A humble attitude doesn’t hurt either. The latest Series C funding brings Egnyte’s total funding to $32 million (other investors include Floodgate Fund and Steve Blank). Given recent gains, Jain is quick to praise DropBox for popularizing similar storage services. He also points out that many players in the cloud storage game–Box, DropBox, YouSendIt, and Google’s own Drive–focus on solving different problems. For mid-to-large enterprise businesses, he believes a hybrid solution like Egnyte is required. His shrewd, strategic thinking appears ready to set his company’s growth afire.