I worked in the San Francisco East Bay for most of my career without beginning to grasp the magic unfolding 60 miles to the south in Silicon Valley. The greatest wealth creation in the history of the world is now a formulaic approach to entrepreneurship built upon the relentless efficiencies of Moore’s Law. A confluence of brilliant founders, savvy venture capitalists and start-up veterans in engineering, sales, marketing and finance apply proven methodologies to start and rapidly scale disruptive technology firms.
Nutanix’ Series D financing gives the company a valuation of around $1 billion. As of November 2013, only 39 venture-backed technology startups (.07%) had achieved this valuation since 2003 according to an article in TechCrunch. Nutanix, as the fastest-growing infrastructure company of the last ten years, stands out even among these exceptional firms. I believe there are eight key reasons for Nutanix’s nearly unparalleled success.
1) Disruptive Technology
With a two year head start and its December 2013 IPO, Nimble Storage preempted Nutanix as the 40th venture backed company to join the Unicorn Club since 2003.
Unlike Nutanix, Nimble’s differentiation is evolutionary rather than revolutionary. Nimble integrates flash with HDDs to provide faster and less expensive storage, but it remains a storage array nonetheless. Because arrays are not integrated with compute, i.e. servers, they are subject to disadvantages such as separate management requirements, network latency, higher costs and an inability to efficiently scale. On the positive side, analysts and the media quickly peg Nimble as an incremental improvement to traditional storage.
Nutanix’s radically different approach as a purpose-built converged platform for virtualized workloads is more difficult for many to understand. The concept originated with the lead scientist behind the development of the Google File System (GFS). Google utilized GFS to enable an extraordinarily scalable, resilient, simple and low-cost converged infrastructure. Its success was emulated, and this type of web-scale architecture is now the standard for all of the leading cloud providers.
Google and Facebook engineers, along with engineers from companies such as Oracle, VMware, and Microsoft, spent four years developing the Nutanix Distributed File System (NDFS) which is at the heart of the Nutanix Virtual Computing Platform. Nutanix brings all of the advantages of the web-scale infrastructure to the modern, virtualized datacenter.
Despite the difficult-to-categorize nature of Nutanix, customers “get it”, and are rapidly embracing the technology for their datacenters. Sun Microsystems, another disruptive technology player in its day, is the only infrastructure company that has grown faster than Nutanix.
Vinod Khosla, co-founder and the first CEO of Sun Microsystems, is an early Nutanix investor. He addressed the Nutanix employees shortly after I joined the company nine months ago. Khosla said that all significant innovation now comes from start-ups which are where the most talented employees want to work.
Everyone talks about the importance of hiring “A-Players”. EMC’s Chad Sakac made huge waves on Twitter a few years ago by his unprecedented hiring of over 100 well-known virtualization SEs for “Chad’s army” of vSpecialists. I think it’s safe to say that Nutanix has raised the bar still further, effectively leveraging social media to hire top virtualization industry professionals across the globe in disciplines ranging from sales engineering to management.
Nutanix has gained a reputation as one of the most desired places for engineers to work. Many come from organizations such as Google and LinkedIn where they gained experience in building out massively scalable environments.
Operations, marketing and finance folks come from firms such as Palo Alto Networks, Riverbed and Data Domain where they contributed to achieving stellar growth. These employees have already received the “been there, done that” T-shirts, and are out to do it again at Nutanix.
The top-notch sales force and SEs hail from industry leaders such as VMware, Microsoft, Citrix, NetApp and EMC. They know how to help channel partners and prospective customers understand Nutanix’s capability to transform their businesses.
3) Channel Partners
Cisco, NetApp, EMC, IBM, Dell and HP each have tens of thousands of channel resellers. These “VARS” are often closely tied to the multi-billion dollar datacenter incumbents and compete again and again with many other resellers who provide very similar solutions.
Rather than just selling “faster/cheaper/better storage” to their customers, Nutanix partners are bringing web-scale architecture to their datacenters. They’re delivering tremendous value by showing their clients a much more efficient way to build and manage their infrastructures.
Nutanix partners tend to be firms across the globe that are unafraid to disrupt their steady stream of marketing and rebate dollars in order to bring their customers a superior solution. Many of them are even focusing divisions or their entire businesses around Nutanix. The result is more sales, more customers, more margin dollars, and a reputation for being innovative, forward-thinking and of leading the charge to a transformative datacenter platform.
4) Nutanix Investors
In addition to Khosla, Nutanix has also received funding from Lightspeed, Battery Ventures, Goldman Sachs and, now, Morgan Stanley, Riverwood, and SAP Ventures. The investors are all patient organizations bringing not only money, connections and fantastic credentials, but most importantly, advice on how to best scale the Nutanix organization in the face of escalating demand.
5) Attention to Detail
Nutanix strives to reduce even the smallest friction in all customer and partner interactions. It’s reflected in the simplicity and documentation of the UI that enables installation in under an hour. And it’s reflected in near instantaneous response to customer and partner inquiries from across the globe whether via phone, email or social media. Internally, this practice is referred to as “low latency” communication. It’s the value of velocity in facilitating scale.
Many organizations have a culture of secrecy. In contrast, Google openly published papers about GFS and MapReduce which not only helped other cloud providers adopt similar web-scale architectures, but that also led to big data based upon Hadoop. Transparency is also part of the Nutanix culture and part of the company’s phenomenal growth.
7) Eyes on the Prize
The ability to begin with a small deployment and then scale perfectly linearly as warranted makes Nutanix a particularly easy purchase decision for VDI initiatives. This and other Nutanix capabilities resulted in winning the Best of VMworld 2011 Gold Award for VDI when the product was just starting to ship. Nutanix quickly became popular in other use cases as well such as test/dev, disaster recovery, big data and Splunk. Nutanix recently won the VMworld 2013 Gold Award for Private Cloud.
But the firm’s vision goes far beyond these use cases. Nutanix wants to see its product become the standard platform for hosting a virtualized datacenter. And customers are increasingly seeing things the same way. They’re deploying Nutanix either to augment their primary production servers and SANs, or to outright replace them.
Nutanix’ rapid success in the datacenter pits it against every legacy server and storage manufacturer. From traditional servers and SANs to “converged infrastructure” solutions such as Vblock, FlexPod and PureFlex, Nutanix battles entrenched industry goliaths on a daily basis.
The seven leading server and storage manufacturers had combined revenues last year of nearly half a trillion dollars; they have a strong interest in maintaining the status quo. A common practice is to attempt to marginalize Nutanix by lumping the company in with its rapidly growing number of imitators who lack a distributed file system, and who play in the SMB space.
But two-thirds of Nutanix’s business is with large enterprises or federal agencies. These organizations are not interested in working with a start-up geared for acquisition. They’re confident that Nutanix not only is committed to its technological vision, but to building a multi-billion dollar enterprise.
Proficiently executing the Silicon Valley formula alone is not enough to achieve a billion dollar valuation in less than five years. It also requires a lot of luck. As an example, the timing needs to be just right. It so happens that the current macro shift to a virtualized datacenter model combines with advances in CPU, memory, disk and, especially, flash to perfectly set the stage for Nutanix to disrupt the status quo.
Of course, Nutanix remains a very young and, for now, small company. A tremendous amount of hard work lies ahead. But the Series D funding brings more than an extra $101 million in cash; it validates the Nutanix vision.