Forget Social, Mobile and Gaming. The Next Frontier? Storage.

Fusion-IO priced its Initial Public Offering last week at $19 per share and immediately traded up to $25 per share, reflecting nearly a $2B market capitalization. The outcome was terrific, both for the company and its investors (who happened to pour in well over $100M into the company), but more importantly the transaction had deeper consequences in the context of its implications for the storage industry.

Fusion-IO’s IPO was the first pureplay storage new issue since 2007 when Compellent, Data Domain, Netezza, 3Par, Isilon and CommVault all went public (and in the years since have all, less CommVault, been acquired for an average of nearly 10X trailing revenues). What is particular and special about Fusion-IO is that it is the bellwether company (even if only in perception) for a new class of storage based on Solid State Disk (SSD) technology, and in my mind marks a significant shift in how new storage technologies will be validated and ultimately valued.

While in the last several decades we have seen tremendous gains in chip technologies enabling rapid provisioning of massive amounts of computing (Moore’s Law) and in networking technologies enabling incredibly fast transfer of data (10, 40, 100+ GbE), the underlying storage backbone supporting these new infrastructure advances has stayed largely the same. Since 1973, when IBM introduced the 3340 Winchester disk drive, storage technology gains have for the most part plateaued. Sure innovations within and around the HDD software stack (RAID, high availability, replication, thin provisioning, dedup, etc.) have optimized scale, performance and reliability of these systems, but the underlying, core piece of technology – the hard disk drive – has remained the same for more than 30 years.

Until recently, storage issues have been viewed as problems associated with scale and the classic response was to throw more and more disk to deal with the data deluge. Regarding performance of applications, the bottleneck was either the CPU or the network.  

Things have changed. Today, we are living in a world where applications require massive amounts short-term compute power and storage. The centralization of computing resources via virtualization and the cloud has correspondingly pushed primary storage systems to their limit as the performance (I/O) bottleneck has shifted. Enterprises are now experiencing the effects of disk contention and latency, resulting in significant deficiencies in database and virtualization performance. Traditional “high performance” storage systems, whose spindles and rigid rotating platters simply cannot keep up with the demands of today’s I/O-intensive Web and enterprise applications, are quickly becoming legacy systems. IOPS (read/writes per second) now matter more than ever.

Enter SSDs, whose I/O potential over traditional rotating magnetic disks is on the order of 2 to 3 magnitudes. Unlike HDDs, SSDs retain

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Born behind the Iron Curtain in Sankt-Peterburg, USSR; went to UC Berkeley to become an engineer; graduated…with a finance / econ degree; helped found a hyper-local news aggregation startup; worked over 100 hours a week as a tech I-banker; now, spending my days trying to discover the coolest tech companies as a VC with RRE Ventures in New York.

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This blog serves two purposes: 1) acquiesces my mandate as a VC to spout off on technology and 2) gives me a place to vent publicly about the San Jose Sharks.