Pivot3 announced on Tuesday that it has secured $45 million in new financing which the company plans to use to further invest in its sales and marketing efforts to take their hyper-converged infrastructure solutions to markets beyond security. Ron Nash, chairman and CEO of Pivot3, said the company has started to receive a lot of attention from data centers and other applications for their appliances and that this round of funding will help them not only build upon their current offerings for the surveillance market, but also branch out more broadly into these other markets.
“Our investors looked at it and said, ‘look, you’re getting so much traction and this hyper-converged infrastructure is starting to be a very, very hot segment of the technology world, let’s look and see if we can raise a large amount of money,’ which is a good thing,” said Nash. “Usually, you’re raising money because you’re losing money and we were funded and headed towards profitability, but decided and made a determination that we were going to raise this money to accelerate.”
Nash said that this some of this money - provided by Argonaut Private Equity, a new investor in Pivot3, along with S3 Ventures, InterWest Partners, Mesirow Financial Private Equity and the Wilson Sonsini Goodrich & Rosati investment fund – will be used for surveillance sales and marketing efforts as the company aims to double its growth rate in the market from 2014 to 2015. The majority of the funding, however, will go towards new sales and marketing efforts, which Nash said is somewhat new to Pivot3.
“We have a very small sales force right now and very small marketing spend going into data centers and we’re going to make that more sizable, so that kind of explains why the round looks so large in a company at this late a stage,” explained Nash. “The data center market is just a much larger market and much more expensive to address on the sales side and on the marketing side.”
According to Nash, Pivot3 was one of the pioneers in what is today called hyper-converged infrastructure delivering one of the first such appliances for the video surveillance market in 2008. Being able to provide robust and reliable appliances for video surveillance, which is one of the most demanding use cases when it comes to computing, was a perfect proving ground for the company’s technology.
“We picked (the video surveillance) industry because we thought our technology fit it very, very well and that turned out to be the case. That’s why we have 1,500 customers or so in surveillance,” said Nash. "Now, in addition, as we installed these (appliances) for our surveillance customers, they started running applications other than video surveillance on our platform because our platform isn’t specifically built for video surveillance, it is a technology that performs very, very well for that, but it performs well for a bunch of other things too and we just weren’t taking them to market in the early years of our company.”
Nash emphasized that the company is not changing its product, but just expanding their focus to include markets beyond the video surveillance industry. He also said that Pivot3 is not putting surveillance on the back burner.
“We’re just talking about the sales and marketing effort of taking it to customers. It’s the exact same technology and anytime we improve the technology, both sides are getting the benefit,” added Nash. “The truth of the matter is you will have more people interested in this product, we will be improving it faster and some of our money this time is going into more our development side and engineering side and surveillance people are going to get the benefit of that.”
One example of how Pivot3’s inroads into other markets have paid dividends for security users can be found in their virtual desktop infrastructure (VDI) solution. According to Nash, a government agency recently leveraged their VDI offering to enable all of its team members who were working on a project together to be able work collaboratively and securely from their own offices.
“To keep that secure, they were flying their entire engineering team into one city in the U.S. every week and putting them up in hotels and then they would fly home over the weekends. They were wearing them out and spending a lot of money on travel costs because they didn’t think they could keep those CAD drawings and other things secure,” said Nash. “We developed that on the data center side for that customer and then we thought, in the surveillance industry, they have a similar problem. They are very worried about their surveillance footage getting out on YouTube… so most people don’t allow remote connections and devices and things like that. By using this same product that we developed for this government agency, we started selling that as a virtual security system to our security customers and they love it.”
Nash said he believes that there is still a lot of education that needs to take place in the security industry when it comes to realizing the benefits of virtualization and hyper-converged infrastructure.
“It’s a massive task and not just on the security side, but also in the data center side. It happens every time you have a revolutionary technology come about. What happens is all of the incumbent, big companies that don’t have that technology, the first thing they do is start messaging that they do and unless you have an educated buyer, everyone’s sales pitch kind of sounds alike,” said Nash. “It is incumbent upon us and other people in the industry to do that education.”
Nash admitted that on the video side of the business, Pivot3 is not as global as he would like the company to be, which should be alleviated somewhat by a newly expanded sales force.
“We’ve got substantial business in areas around the globe and long list of countries where do business, but what we don’t have is a lot of great coverage in a lot of places,” he concluded.
