IVCA Profile: The 2016 Venture Capital Portfolio Company of the Year is Cleversafe

IVCA Profile: The 2016 Venture Capital Portfolio Company of the Year is Cleversafe

October 26, 2016

In approximately one month – on December 5th, 2016 – the Illinois Venture Capital Association will gather for the IVCA Annual Awards Dinner. The yearly event honors the persons and organizations that have made an impact both within the association, the broader VC/PE industries and the community at large. The IVCA newsletter will profile the 2016 honorees in the next month, beginning with the Venture Capital Portfolio Company of the year, Cleversafe.

Cleversafe was founded in 2004 by Christopher Gladwin, and is a recognized market leader in object-based, on-premise data storage solutions. Clients from multiple industries use Cleversafe for large-scale content repository, backup, archiving, collaboration and storage as a service. This enables these clients to scale their data to exabytes of storage (billions of gigabytes). In November of 2015, Cleversafe was sold to IBM for $1.3 billion dollars – it’s now known as IBM Cloud Object Storage.

Cleversafe generated close to $100 million in multiple rounds of Venture Capital funding over eight years to perfect the technology and build their team. Investors for the IVCA included Harrison Street Capital, Motorola Solutions Venture Capital, New Enterprise Associates, OCA Ventures and the Pritzker Group Venture Capital.

New Enterprise Associates (NEA) was the primary interactive firm with Cleversafe, leading its small series B financing round when the company was just beginning, in August of 2006. Ten years later, NEA was the lead investor in Cleversafe’s $55 million Series D financing round. Peter Barris, the Managing General Partner at NEA, spoke recently about the various reasons their firm continued to invest in Cleversafe until its exit.

THE FOUNDER

“We had a familiarity with Chris through one of his earlier companies, MusicNow, so in determining which is most important – the horse or the jockey – we didn’t have to choose. We had a great entrepreneur (the jockey) whom we knew was brilliant, had the ability to assemble a strong team and possessed a unique technology concept in a data-storage field (the horse) that was exploding and that played to his background.”

THE LEADERSHIP

“We were Cleversafe’s largest shareholder but we didn’t have a controlling interest and didn’t look for one. We bet on a board of reasonable people making reasonable judgments and getting everyone on the same page. As a director, I viewed my role as making sure the board members were all rowing in the right direction.”

THE “BIG IDEA”

“Ours was a bet on technology. Chris had a theory that storage was where it was happening but that typical storage systems that relied on a centralized file directory wasn’t going to be sufficient and would be a bottleneck. His theory that an object-based (think pictures and videos) data storage software and appliances offered a better solution proved valid, thanks to his distinct information dispersal algorithm and Tier 1 storage system to slice up data. It actually got better as the size of the system grew. The more you stored, the more the system got faster, more reliable and more cost effective while others’ systems got slower, less efficient and less reliable the bigger they got.”

THE INTELLECTUAL PROPERTY

“Cleversafe had a differentiating technology and protected technology. At the time we sold it to IBM, we could count 350-plus issued patents. By one measure, it ranked in the top 10 global companies with the most potent patent portfolio, along with IBM, Apple, Samsung and the like.”

THE TALENT POOL

“Chris was convinced that Chicago had advantages (as Cleversafe’s home) and that he could find the talent he needed to continue and scale the business either in Chicago or he could attract to the city. Chicago has lots of talent and a huge supply source from Midwestern universities.He felt he didn’t have the challenge startups have in Silicon Valley where there’s little loyalty and very high human capital costs.”

The breakthrough for Cleversafe came in 2011, when the social expression/personal publishing platform Shutterfly became a major customer. The 12 year old company needed a leading edge advance for scaling their massive amounts of data, and Cleversafe provided it, with a storage system that also could realize a significant cost savings. This contract sparked other deals, with KDDI (a Toyko telecommunications giant) and Sky Television, the pan-European broadcaster.

Peter Barris of NEA and other board members assisted founder Chris Gladwin with significant go-to-market strategy. In the August 2013 Series D financing, the company used much of that round to boost their sales operations. “In the earlier stages, it may be credibility or access to expertise. Later, you want to offer real experience that might help in identifying companies that might acquire the firm,” Barris indicated.

The IBM acquisition of Cleversafe resulted in 35 to 100 times returns for early investors. But for founder Chris Gladwin, it produced a different element of satisfaction. “We created fantastic jobs for over 250 people and when I look at our employees and investors, we returned over $1 million to more than 80 people.”

The 2016 IVCA Awards Dinner is open for ticket and table purchase by IVCA members.  Non-members may purchase tickets and tables beginning Wednesday, November 9th.

Click here for more information and purchases.