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Dell Announces the Creation of $60M Dell Venture Fund

Today Dell announced the creation of a $60M venture fund for investing in storage companies. The unit will be led by Jim Lussier, ex-partner at Norwest Venture Partners, a reputable Silicon Valley venture firm, and Carter George, Executive Director of Dell Storage Strategy. Approximately 50% of the funds will be used to fund early stage companies, including those that need seed funding. The remaining 50% will be used to maintain ownership levels in subsequent rounds of funding. According to Dell, the $30M to be used for initial funding will likely fund 5 to 10 early stage companies, with $3M to $5M being the sweet spot. Additional venture funds may become available for investments in other segments but for now the announcement covers only storage.

Read the Dell Blog here: Dell Is Fueling the Next Big Thing in Innovation – Dell Ventures Announces Early Stage Storage Investment Fund

Why storage?

The answer I believe is simple. Storage innovation is at an all-time high. The pace of data is so blistering that most, if not all existing products have to be revamped over the next five years to cope. Big Data is not just a buzz word. Some vendors are overusing it but no one can question what is happening: companies are beginning to drown in data and both the storage of and more importantly, extraction of any meaningful information from this data, is cumbersome with existing products. Innovation is needed (and is happening) at record pace, to prepare the next generation data center. Dell wants to be sure it has its fingers in the innovation pie.

Another important factor is the fact that Dell is, relatively speaking, a newbie to storage. Only in the past five years or so has it made a decision to be a true developer of and not simply a reseller of storage products. Its acquisitions, such as EqualLogic, Compellent and Ocarina have been stellar and Dell is feverishly integrating them into a holistic whole. Now Dell wants to build on this base with continuing innovation through these and other acquired resources but to also keep a foot in the early startup camp.

I believe this is an excellent way to take the pulse of what is coming next and have a measure of control on how to bring those technologies in. Because Dell would have a Board seat in the startups it invest in, it would have the opportunity to take out a particularly innovative company sooner than it might have otherwise. It would also see a deal flow simply because the entrepreneurs would know Dell is a potential supplier of funds. No better way to stay current with what is coming down the pike. And not all these investments need to end with an acquisition by Dell to be successful. Acquisition by another company may be the right answer and it could generate some serious returns. But the way I see it the principal purpose of this fund is not to generate income. It is much more than that.

Of course, for the startup, Dell would provide something each startup craves: access to end users who can validate the direction and provide a real testing environment at the right time. For most startups this alone is reason enough to put Dell on top of their list.

To be sure, this venture fund is not a substitute for funds needed to make big acquisitions in the market. Those remain separate and distinct. Dell Ventures needs to be viewed exactly as any other venture fund: it is designed to invest in risky, stage 1 companies. Assuming it does a good job, we would expect Dell to have similar ratio of success to failure as other top name VCs do.

Each major storage player in the industry, including EMC, HP, IBM, NetApp, has a venture fund of sorts. But EMC probably has the closest to a pure venture fund that is truly designed for investments in early stage companies. Others do it more on an ad hoc basis. Dell knows it is starting from behind in storage. It has to fight harder. It has to integrate better. Dell Venture seems to be yet another example of this spirit. 

  • Premiered: 07/17/12
  • Author: Arun Taneja
Topic(s): Dell Jim Lussier Arun Taneja Storage Venture Carter George


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