HP Enterprise just bought a $1 billion startup for $650 million

SimpliVity Doron KempelYouTube/Worcester Business JournalSimpliVity CEO Doron Kempel

HP Enterprise has bought SimpliVity, a Massachussetts-based storage startup, for $650 million in cash.

At the time of SimpliVity’s last fundraising, in March 2015, the company had declared that it was valued at “
more than $1 billion.” All in all, SimpliVity had raised $276 million from investors like Kleiner Perkins, Accel, and Waypoint Capital.

That discounted purchase price is not an encouraging sign for the viability of “unicorn” startups of $1 billion or more. In 2017, companies like Snap, Spotify, and Dropbox will likely have to justify their enormous valuations to Wall Street, and deals like this one will only enhance investor scepticism.

SimpliVity competed most directly with Nutanix, a fellow former “unicorn” with a private valuation of $2 billion, that went public in September 2016.

Both companies were racing to make a dent in the market for so-called “hyperconverged” infrastructure, a more cost- efficient way of handling data center-scale server storage that poses a threat to hardware giants like Dell EMC and HP Enterprise. Spending in this market is expected to reach $19 billion by 2018, Gartner predicts.

By buying SimpliVity, HP Enterprise takes the startup’s capabilities and adds it to their own — crucial as the company moves to compete with the combined Dell EMC juggernaut, following the close of their mega-merger. Dell EMC, for its part, has been investing heavily in the market, and resells Nutanix hardware to its customers.

On a final note, SimpliVity has an interesting background: Founder and CEO Doron Kempel was once part of an elite Israeli special forces unit charged with killing Saddam Hussein, on a failed 1992 mission that resulted in five casualties. Afterwards, Kempel moved to the United States to work for EMC and, later, IBM.

More recently, SimpliVity was tapped as consultants for the most recent season of HBO’s “Silicon Valley,” where they helped the showrunners make sure that Pied Piper’s “beautiful box” was as realistic as possible.

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