Posted on Wednesday, Feb 4th 2015
Billion Dollar Unicorn Club has some interesting stories of companies in the same space reaching Unicorn status through different business models. One such story is that of Egnyte, which like Box, operates in the cloud storage space. But unlike Box, Egnyte operates a leaner ship and offers an enterprise grade product that can command much higher pricing.
Mountain View-based Egnyte was founded in 2008 by entrepreneurs Vineet Jain, Rajesh Ram, and Kris Lahiri. Prior to founding Egnyte, Vineet Jain had founded
Valdero, a supply chain software provider, which was sold to One Network Enterprises. Egnyte came into being when the co-founders replaced a physical file server with a multi-tenanted and hosted server. At that time, they did not realize that they had actually built something similar to a cloud-based server. They called the first prototype of their product an on-demand file server.
Egnyte may operate in the enterprise file sharing segment like Box, but they are a very different animal. Unlike Box, Egnyte’s offerings are based on a hybrid approach that allows their customers to store their files either on-premise or on the cloud. Egnyte realizes that most organizations would like to keep some of their files on-premise to maintain higher security and compliance. Their
hybrid platform converts the organization’s file servers into a single storage platform with flexible deployment capabilities so that organizations can themselves decide which files are to be stored behind their firewalls on their premises and which of those are to be made available on the cloud.
In a more recent product upgrade, Egnyte has also simplified this classification of files. Now, they use a smart algorithm that automatically decides where to put the files based on their popularity. A more popular file is thus put on the fastest available storage space while ensuring that the organization’s basic security policies regarding firewalls are met. Similarly,
files that have not been used for some time are moved to a cheaper archival storage automatically.
Egnyte is now focused on moving to value-added opportunities to expand their presence in the segment and to be able to command a premium pricing for, what is soon becoming, a
zero-sum game space. They foresee the evolution of the offering to follow four key stages. The market began as a cloud storage service allowing for organizations to move from a capex to an opex-based costing for their storage services. But it is now expanding to the next stage of offering a file-sync-share capability, almost like a commodity. The next stage of the market is expected to be that of offering additional value-added opportunities for the service. These upstream features will include collaboration, data protection, and data management.
Egnyte is not only different from Box in the nature of its offerings, but is also different in the way it operates its business. Egnyte has been revenue-focused for a while. They do not offer a freemium model and charge their customers a software usage fee based on the number of employees that access their platform. Prices vary depending on the size of the organization. For very small organizations with less than 25 employees, the basic package of 5 TB Storage, standard support with enterprise class security is available at a price of $8 per employee per month. Pricing for medium-sized organizations with less than 100 employees increases to $15 per month and offers additional features such as 10 TB Storage, Outlook integration, and custom branding. They also have higher premium services available for larger organizations
. The Enterprise option comes with access to an unlimited number of employees and provides the organization with features such as unlimited storage and administrative capabilities.
Egnyte’s detailed financials are not disclosed.
According to recent reports though, the company is still not profitable, but is getting there. They are operating at a gross margin of 68% and are expected to grow to 74% this year. Egnyte also expects to become cash-flow breakeven this year, and will turn profitable in the first quarter of 2016 and is expected to generate revenues of $100 million this year.
Egnyte is venture funded so far with $62.5 million in funding from investors including Kleiner Perkins Caufield & Byers, Google Ventures, Polaris Partners, Northgate Capital, CenturyLink, Seagate Technology, and FLOODGATE. Their last round of funding was held in December 2013 when they raised $29.5 million at an undisclosed valuation from Seagate Technology, CenturyLink, Northgate Capital, Kleiner Perkins Caufield & Byers, Google Ventures, and Polaris Partners. The
company has reportedly received several merger options, but has not agreed to any of them as they want to remain independent.
Egnyte’s valuation is unknown, but to put their numbers into perspective,
Box earned $153.8 million in revenues for the nine months ended October 2014 and reported losses of $125.2 million. They have raised $564.1 million in venture funding and were valued at $2.4 billion in July 2014. Earlier last month, Box went public and was valued at $1.67 billion.
I spoke with
Vineet Jain at a roundtable last week. You can listen to the recording here:
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book,
Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures. This segment is a part in the series : Billion Dollar Unicorns
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