Pure Storage Boosts Lofty Valuation

Pure Storage Inc., which is trying to remake corporate-data storage with technology that originated in smartphones, is joining the ranks of the most richly valued startups.

The four-year-old company on Wednesday confirmed a new investment round that values Pure at more than $3 billion. Pure said it raised $225 million in new financing from some of its existing shareholders and one newcomer, investment-management firm Wellington Management Co.

On Tuesday, The Wall Street Journal reported Pure was finalizing new financing with investors including Wellington at a valuation of roughly $3 billion or more.

This is the second big funding for Pure in less than a year, following a $150 million financing round last summer that took the company" valuation above $1 billion. Pure said Wednesday it now has raised $470 million in total, as the company battles longtime storage-market leaders such as EMC Corp. and a fleet of other startups.

Only about 15 companies backed by venture-capital firms are valued at more than $3 billion, according to Wall Street Journal research.

The deal is the latest sign of investor appetite for a new roster of companies betting they can replace or supplement companies' existing computing gear and software. Database sellers Hortonworks Inc. and Cloudera Inc. and email-marketing firm Campaign Monitor are among sellers of technology to companies that have raised $100 million or more from investors in recent weeks.

The fundraising activity also suggests that, at least for now, recent stock-price gyrations affecting technology companies aren't broadly curtailing funding for startups.

Pure is among the best-known startups selling systems that store corporate data on chips known as flash memory-the same technology used to save information in smartphones and tablets. Flash storage promises to fetch stored data much more quickly, and using less energy, than the disk drives companies typically use to store their digital information.

But flash memory remains a niche for most companies, in part because it still costs far more per byte of data stored than spinning disks. Research firm Gartner Inc. says about 2,000 storage systems with flash memory shipped in 2012, and it expects the number to climb to 20,000 systems by 2017.

A key selling point for Pure is software that compresses and eliminates duplicated data, so the information requires less storage space on the flash memory chips. Pure says the technology effectively eliminates the cost disparity for companies compared with high-end systems using disk drives.

Pure faces plenty of competition from both large and small companies, including EMC and International Business Machines Corp. Two flash-based startups, Nimble Storage Inc. and Violin Memory Inc., completed initial public offerings in 2013.

Research firm Gartner has said it expects many smaller flash storage vendors will fail in the next few years.

The company said its new financing round included mutual funds T. Rowe Price and Fidelity Investments and hedge fund Tiger Global, which also invested in Pure last summer. The company said earlier investors Greylock Partners, Index Ventures, Redpoint Ventures and Sutter Hill Ventures also participated.

In a blog post Wednesday, Pure Chief Executive Scott Dietzen said he believes the company has a head start over other sellers of flash-storage systems, and "the right thing to do" is to put pressure on rivals by growing as fast as possible and spending more money to improve Pure's technology.

Douglas MacMillan contributed to this article.

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