SaaS: Hosted Storage & Backup

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1 SECTOR OVERVIEW REPORT SaaS: Hosted Storage & Backup February 2011 INSIDE THIS ISSUE 1. Introduction 2. Valuation Trends 3. Acquirer Landscape 4. M&A Activity 5. Venture Funding 6. Company Landscape: Acronis Box.net Carbonite efilecabinet egnyte Itronis VaultLogix Others Contact: Russ Crafton, Partner INTRODUCTION This report focuses on the software as a service market and particularly, the online backup and storage sector. This is the first in a series of reports targeting specific sub-sectors of hosted applications for business. Following reports will cover other sub-sectors including hosted PBX, collaboration platforms, cloud content management, , web commerce, security, and application software. Each of these reports will look at the emerging players in these sub-sectors, review the investment and M&A activity to date, and discuss valuation metrics and the potential acquirers. Importantly, we believe that over the next several years, a few large consolidators will seek to build out a full suite of offerings for business users, particularly in the SME market, and will thus need to acquire or build solutions across each of the above categories. As a result, we look this series of reports as a roadmap for players like Intuit, J2, Verio, and others that will assemble full suites of SaaS Applications for the SME market. Storage and Backup: A Critical Applications for the Business Suite The online storage and backup market presents a lot more opportunity than meets the eye and offers an excellent foundation upon which to build a SaaS business targeting small and mid-sized enterprises (SME s). While the online storage sector may seem somewhat crowded and ripe for commoditization, we think the space provides an opportunity to secure a highly stable customer base upon which a broader hosted business can be pursued. While storage has been one of the first areas in which SME s have adopted a hosted solution, a range of apps are steadily moving to the cloud. While many of these apps are currently provided by smaller, niche players, over time, we expect the winners to be those who offer a full business suite of apps, integrated to provide enhanced capabilities. Specifically related to storage, we think several opportunities exist. First is simply the opportunity to consolidate a sizeable customer base in a still rapidly growing market. A number of players have been and likely will be successful here including Carbonite, Itronis, and others. Beyond the core hosted storage however, we think a broader opportunity exists within content management. Storage a Platform or an Application As businesses increasingly store data in the cloud, the need for more robust cloud content management solutions will grow. Nearly all SMEs will turn to some form of hosted storage and once their data is regularly stored and accessed from the cloud, users can benefit from broader cloud content management solutions. These solutions will need to be tailored to specific verticals that will allow users to more effectively access, share and collaborate on content in the cloud, rather than simply storing their for safe keeping. In this broader content management concept, we think its helpful to think of online storage not as an application but rather a platform (PaaS), on top of which a range of applications can be built. From this perspective, securing the data online from customers provides the base for a broader business around content management. As a platform (PaaS) on top of the data center (IaaS), the vertical solutions and content management systems are then the applications (SaaS) sold to end customers. If one thinks of online storage as simply a form of backup, then the business model seems less attractive due to commoditization and limitations in differentiation. However, if you look beyond the simple backup aspect and think about the applications that can be built around content management such as collaboration and secure access by 3rd parties, the opportunity looks much more promising. Companies such as efilecabinet and Box.net are a few examples of players that have migrated their storage offerings to content management solutions for managing and manipulating content. Vertical Solutions Required One of the more significant opportunities in online storage is the need for vertical solutions. Simply storing data on a remote server is one thing, but adding portals, viewing technology and collaboration, and access monitoring to create a robust con- Redwood Capital 885 Third Avenue, 25th Floor New York, NY

2 2010 TEV/EBITDA Multiple Sector Overview tent management system in the cloud will require solutions tailored to different industries. The needs of healthcare providers (doctors accessing patient records) is very different than needs of a tax preparer or an attorney for storing and making available annual tax returns or legal documents to clients. SaaS 2.0 is About Integration For online storage, this migration to, or integration with, content management is a typical trend in applications the need for tighter integration. Many enterprise applications do not reach their potential until successfully integrated with other parts of the IT infrastructure. As these applications migrate to the cloud, that same level of integration will be required. Whether its data storage integrated with content management or hosted contact center integrated with CRM, while many applications can gain initial traction as point solutions, the ability to integrate with related applications and leverage common data and resources is critical. As a result, we believe that as larger players build out full suites of hosted apps and provide integration across those apps, they will achieve significant differentiation that will allow them to consolidate market share at the expense of point-solution providers. A Great Offering to Sell Thru the Channel Hosted storage, like a number of hosted apps presents an excellent product to sell through a reseller network primarily other hosting providers and data MSP s. A few companies such as Itronis and Vaultlogix have built their business models to leverage this master MSP approach, building private label and reseller programs which provide a greater ability to ramp. For basic hosted storage and backup, we suspect that a few large players will likely emerge, selling their offerings through channels into the SME base. In fact, given the size of the market and challenge in selling into the SME space, the eventual winners for basic storage will probably have to achieve that success through an indirect sales approach. Large Players Will Drive Consolidation Many large players were slow to release hosted solutions, believing that they were simply for SME s which was not an important market for them. However, as many SaaS based applications have quickly grown, larger players have moved to create full suite of hosted apps for SMEs. Just over the past year, a number of major players completed acquisitions including Dell (Ocarina), Trend Micro (Humyo), and J2 Global (KeepITSafe). We believe that this is the beginning of a consolidation trend in the space that will ultimately focus on larger players adding specific technologies or vertical solutions to enhance their online storage and cloud content management offerings. Valuations for most SaaS and hosted services offerings are still trading at relatively high valuations, reflective of the strong growth prospects that must public equity investors have for the space. As shown in the scatter plot below, SaaS companies with annual EBITDA growth of 15% to 20% are trading at 10x to 20x EBITDA multiples. While data for private market valuations is a little more difficult to come by, we have found that valuations in the private markets are noticeably below the 15x or higher EBITDA multiples at which many public players tend to trade. While the public markets often tend to place higher valuations on businesses than the private markets, in this case, we think a great deal of the higher public market valuations is simply due to the scale and market VALUATION TRENDS leadership obtained by leading players such as SalesForce or Concur. Given the recurring revenue of these businesses, early leaders like Sales- Force are in a very strong position and likely to be able to maintain the growth necessary to justify such higher valuations. Meanwhile, many private companies are still smaller with less of a commanding position, thus providing greater risk and a higher discount factor on future growth. Finally, most SaaS players have fully rebounded from the market downturn over the past 3 years with most now trading at or above their previous stock price highs. This is evidenced in our SaaS index (see the next page) which is up nearly 75% since January x 25x 20x 15x 10x 5x 0x 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% EBITDA Growth Rate Rackspace Blackboard Ultimate Software Group Taleo Websense Constant Contact Rightnow Technologies DealerTrack LivePerson Kenexa Vocus Sources: Capital IQ 2

3 Public Comparables $ millions Research Projections Company Name Market Cap 2010E CY Revs 2011E CY Revs 2010E CY EBITDA 2011E CY EBITDA 2010E EBITDA Margin 2011E EBITDA Margin Revenue Growth '09-'10 Revenue Growth '10-'11 EBITDA Growth '09-'10 EBITDA Growth '10-'11 TEV / 2010E Revs TEV / 2011E Revs TEV / 2010E EBITDA TEV / 2011E EBITDA SaaS Salesforce.com $17,830 $1,651 $2,021 $294 $369 18% 18% 26% 22% 86% 25% 10.6x 8.7x 59.6x 47.5x Rackspace 3, % 34% 23% 21% 55% 25% 5.0x 4.1x 14.9x 11.9x Concur Technologies 2, % NA 19% 21% 35% NA 7.8x 6.4x 27.1x NA Ariba 2, % NA 7% -2% NM NA 5.3x 5.4x 23.9x NA NetSuite 1, % 11% 15% 17% -267% 32% 8.0x 6.9x 83.6x 63.6x Blackboard 1, % 26% 19% 14% 26% 24% 3.4x 3.0x 14.1x 11.3x Ultimate Software Group 1, % 16% 16% 19% NM 28% 5.2x 4.4x 34.1x 26.6x j2 Global Comm 1, % 49% 4% 27% 9% 21% 4.4x 3.5x 8.6x 7.0x Taleo 1, % 21% 19% 24% 89% 23% 3.8x 3.0x 18.1x 14.7x Websense % 30% 7% 4% 102% -5% 2.4x 2.3x 7.4x 7.8x Constant Contact % 16% 35% 25% NM 54% 4.1x 3.3x NM 20.4x Rightnow Technologies % 19% 20% 17% NM 60% 3.6x 3.1x 26.8x 16.8x DealerTrack % 21% 8% 11% 66% 36% 2.7x 2.4x 15.7x 11.6x LivePerson % 26% 26% 21% 48% 31% 4.6x 3.8x 18.8x 14.3x Kenexa % 15% 23% 25% 91% 30% 2.2x 1.7x 14.9x 11.5x Vocus % 18% 15% 15% 285% 33% 4.2x 3.7x 26.8x 20.2x DemandTec % 8% 1% 13% NM 145% 3.5x 3.1x 94.7x 38.7x Sources: First Call mean estimates for projections; Capital IQ historical financial and operating data Price Close 1/4/2011 Mean 21% 22% 17% 17% 52% 38% 4.7x 4.0x 30.6x 21.6x Median 18% 19% 19% 19% 60% 30% 4.2x 3.5x 21.3x 14.7x Stock Price Performance Index: CRM, RAX, CNQR, N, 13 more (Market Cap) - Index Value NASDAQ Composite Index (^COMP) - Index Value S&P 500 Index (^SPX) - Index Value Sources: Capital IQ 3

4 ACQUIRER LANDSCAPE Shown below and over the next several pages are short profiles of the some of the leading potential acquirers in the online storage, backup, cloud content management spaces. We ve attempted to lay out the relevant business activities of these larger players and some of the rationale as to why they may make acquisitions in this sector. Some of the players already have active hosted storage businesses and are candidates for acquiring enhanced technologies, larger customer bases, or vertical solutions. For others, our thoughts may be a little more speculative. However, we believe the players below are all viable acquirers that should be considered by sellers in this space. Acquirer Profiles Acquirer Relevant Business Activity Strategic Rationale Intuit Microsoft Software for small business applications including Quickbooks, TurboTax, Payroll, Website builder and point of sale solutions Very Large Base of SME customers using its software Online storage, backup and cloud content management should be areas very actively under consideration for acquisition. Microsoft office is by far the most significant business application used in 90% plus of enterprises Perhaps best positioned to offer a suite of hosted applications for the SME business customer given its broad customer base Expect continued add on acquisitions of niche SaaS applications specifically aimed at selling into its customer base. Likely to seek to own the applications it hosts as opposed to being a managed hoster Expect targeted applications of technologies and features to enhance its SaaS application offerings. Microsoft Live provides a suite of hosted apps for SME customers including MSFT office, collaboration solutions, website design and hosting. Could use a much more robust cloud content management solution for SME customers for which Sharepoint is prohibitive. Microsoft SkyDrive aimed at storage and file sharing for consumers and SME customers. Verticalized Front ends likely left to 3rd party developers Cisco Leading player in VoIP / PBX and contact center solutions SME customers have been an important target - look for more acquisitions of app to complement Cisco's effort to build a strong UCaaS business. Amazon Also owns webex, a leading collaboration and online conferencing platform Through its Unified Computing System (UCS), offers a complete hardware / software solution for the data center. Has competed at the IaaS and PaaS layers through its EC2 (Elastic Cloud Compute), AWS (Amazon Web Services) and S3 (Storage Solution). Other IaaS offerings include payments (Flexible Payment Service), content delivery (CloudFront), and databases (SimipleDB and Relational Database Service). Specific applications needed including storage / backup & recovery, greater functionality in collaboration, and cloud content management. Cisco has and will likely continue to play at all layers of the stack both in the enterprise, carrier, and data center. Some speculate that Amazon could move more into the SaaS (application layer) selling directly to its customers - but could create channel conflict The kindle has the potential to evolve as an endpoint for a CMS for consumers that could incorporate a range of document storage and retrieval. Google Agressively targeting cloud offerings for business including a suite of productivity applications Goole App Endure which provides developers with a cloud based computing environment to develop, store and serve Web-based applications. Google gmail continues to gain traction and provide a solid base from which to expand a suite of enterprise apps to compete with Microsoft. Offers Cloud Storage for developers, targeting Amazon's S3 storage platform. Also offers storage as part of Google Docs - but not a robust offering. Also has several consumer oriented content management and file sharing solutions Acquisitions of technologies to create a more robust backup and recovery for Google Docs and SME focused content management could make sense. Rackspace Broad managed hosting service offering hosted storage, application hosting, hosted exchange and other MSFT applications. Unlikely to make substantial acquistions of SaaS products and actually own the solutions it hosts. Large customer base and expertise in indirect channel and strong reseller network to the SME market. Look for applications at the PaaS and IaaS layers aimed at better integrating products and solutions for customers. Has a hosted exchange business for SME's as well as a storage and backup offering. VMware Leading player in virtualization. Look for acquistions aimed at expanding within the platform and layer including software aimed at enhancing its virtualization capabilities. Owned 86% by EMC but operated on a stand-alone basis. Software around making applications available on a multi-tenancy basis could be key area of acquisition. SalesForce Unique in its position in playing at the SaaS and IaaS layers. Look for applications aimed at enhancing its CRM offering including analytics and BI related apps. Originally grew through its CRM application, now the dominate SaaS-based CRM product. Look for significant acquisitions to build its platform layer capabilities including new tools and solutions for developers to build applications in the cloud. IN 2007, introduced its Force.com development platform for the cloud, allowing developers to build, test and deploy cloud based applications. Likely moves into storage include a platform for Developers for storage related apps, similar to Amazon S3 or Google CloudStorage 4

5 Acquirer Profiles (Cont.) Acquirer Relevant Business Activity Strategic Rationale IBM Offers a broad set of hardware and software solutions for Cloub-based offerings. Expect technology-based software acqusitions to expand its core offerings around Tivoli and Websphere and its SOA initiatives. Leading content management player with broad range of offerings around archiving & storage, content mgmt, archiving and document management. Primary focus on mid-size and larger players through its idataplex, and sseries and pseries consolidation platforms. Despite some small app acquisitions, we expect IBM to take a partnership approach for many SaaS apps and remain focused on large enterprises Having exited its laptop business and focused on large enterprises, we expect its storage efforts to focus on high end data center / private cloud. EMC Leading storage company and majority owner of Vmware. Owns a leading Mozy, a consumer / SME online backup player. Also acquired Documentum in a strategy of leveraging its position in data storage into the content management and collaboration space for large enterprises. EMC could follow its strategy with Document to acquire vertical specific cloud content management players (like Box.net) to complement its SME base Citrix Only enterprise software company with end-to-end virtualization, networking and software-as-a-service (SaaS) technologies. Has built a large SaaS business with solutions for webconferencing (GotoMeeting), remote access (GoToMyPC), GoToWebinar, GoToAssist. Online storage and content management solution would serve as excellent complement to current cloud solutions. Likely to pursue a broad, horizontal play given the breadth of its SME customer base and nature of its SaaS apps currently being sold. Dell Leading supplier of hardware and software to SME's and large enterprises. Next step in expanding hosted offerings for SMEs would be a cloud content management solution as a more elegant front end for online storage Aggressively acquiring into the services layer for both large customers (thru Perot Systems) and SMEs (through MSP Everdream). Recently acquired Ocarina Networks, an online storage optimization technology provider. Already offers online backup and storage as part of its suite of cloud services. BlackBox Large system integrator of communications and data network for mid and large enterprises. Building out a managed services offering to complement integration and product resale business. Offers disaster recovery and managed service basis. Online storage and backup service offering could serve as a nice, core complement TrendMicro Leading reseller of security solutions to the enterprise and consumer markets. Recently acquired humyo, a European online storage and synchronization service. Has actively been building a managed services and direct resell business through acquisition. Likely to remain focused on more broad, horzontal offerings HP Wide range of offerings from Large Enterprise to Consumer Very actively serving the mid and large enterprise market with data center and private cloud solutions. Had launched Upline, a hosted storage business in 2007 but closed with business within a year. To date, has not actively built a services business for SMEs or consumers. Apple MobileMe offering provides storage, synching for iphone, Mac, Ipad and related Apple devices. Online storage and recovery would serve as one of several necessary components to replicate what Dell, Apple and MSFT have done. Unlikely to make acquisition to serve the Enterprise market. Investments in MobileMe likely preclude any major acquisitions other than technologies to complement the MobileME platform. Seagate Much of Seagates business (consumer and SME) will migrate to the cloud and they must, and have, followed. Migration to cloud presents Seagate the opportunity to move up the stack. As the permenant repository for data, content management become a viable business line. Owns i365, a leading online storage business. Verticalized solutions and content management functionality will be important ways for Seagate to maintain leadership in the storage space for SMEs. Expect to pursue higher level, content management solutions to potentially expand its offering and remain competitive. 5

6 MERGERS AND ACQUISITION ACTIVITY 2010 commenced a consolidation phase, evidenced by acquisitions by a number of major players including Dell, Trend Micro, J2 and Facebook. With these large players all making moves in the space, it is likely that other large strategic players are also seeing the need for an online storage offering. While many large players have been building their own internal offerings, we suspect that many will still seek to complement their solutions through M&A for technology or vertical specific capabilities. acquisitions an expensive and unattractive alternative to growth. However, as the market matures and the ability to easily grow the top line becomes more challenging, M&A will likely accelerate. We think that will eventually be the case in this sector where customers are very hesitant to switch vendors. Once that market becomes highly penetrated and the ability differentiating an offering is increasingly difficult, the only significant means for growth is through acquisition or product expansion. As for consolidation among smaller players, we suspect that over the past year of so and potentially for the next 12 to 18 months, many emerging players will find that it is simply much cheaper to acquire new customers through the normal sales and marketing cycles than through acquisition. As with most hosted businesses customer acquisition costs early on can be rather low, making Regarding the product expansion angle, we think that many storage and backup players will begin to verticalize their offerings, moving into the hosted content management area with solutions tailored to industries such as medical, tax and services, and other specialized industries. Players with strong offerings in an attractive vertical will become attractive acquisition targets. ($ in millions) Selected M&A Present ($ in millions) Date Ann Target/Issuer Deal Value Buyers/Investors Target Description 10/29/2010 Drop.io - Facebook Drop.io, Inc. provides a platform for private media sharing through a system of drops. It offers a private place for storing and sharing photos, video, audio, notes, and documents. 10/21/2010 keepitsafe Data Solutions Ltd. 7/20/2010 Squirrel Storage Ltd. - j2 Global Communications, Inc. - Cintas Corporation (NasdaqGS:CTAS) keepitsafe Data Solutions Ltd. provides online backup services in Ireland and internationally. The company offers small office, SME, enterprise, and continuous data backup services, as well as Microsoft backup, a solution to automate the Navision backup for Microsoft ERP system. It has a strategic alliance with CMS Peripherals. Cintas Document Management UK Limited provides document and data storage services in the United Kingdom. The company offers hard copy archiving, document scanning, confidential document shredding and destruction, pallet and self-storage, online backup, security, and collection/delivery services, as well as records management services. 7/19/2010 Ocarina Networks, Inc. - Dell Inc. (NasdaqGS:DELL) 6/11/2010 humyo.com Ltd. - Trend Micro Inc. (TSE:4704) Ocarina Networks, Inc. provides online storage optimization solutions. The company s ECOsystem technology deploys de-dupe and compression algorithms for extracting, correlating, and optimizing data. Its products include Optimizers, data storage optimization appliances; ECOreader, a software layer for reading optimized files on storage systems; and ECOvault, a hyper-compressed archival solution. humyo.com Ltd. provides online storage and synchronization services for consumers and business owners in Europe. The company s drag and drop technology based solution integrates into the users desktop environment, allowing them to access, share, store, and backup their digital content online and offline. 5/10/2010 NeoNova B.V. - OneIP BV NeoNova B.V. develops internet products, which include online backup systems and voice over Internet protocol. The company is based in Amsterdam, the Netherlands. 3/22/2010 Data Lock Limited - Maximum Internet Limited Data Lock Limited provides online backup solutions for files, databases, and disk images to businesses in New Zealand and Australia. The company stores the data transferred by its clients over the Internet in its data centers, as well as enables them to restore data via downloading. 2/9/2010 Everyone.net, Inc. - Proofpoint, Inc. Everyone.net, Inc. provides software as a service messaging services for small businesses, professionals, and individuals. It offers one_mail, a business ; one_archive for backup, storage, retrieval, and recovery; one_storage, an integrated and secure online storage solution; and one_sync, which integrates Outlook with one_business platform. Sources: Capital IQ, Venturewire, Redwood Capital 6

7 ($ in millions) Date Ann Target/Issuer Deal Value Buyers/Investors Target Description 1/26/2010 CDI Vaults Inc. - Access Information Management Shared Services, LLC Selected M&A present, continued CDI Vaults Inc. provides records and data management services. It offers online backup services; data security services, including live file management for medical clinics, veterinarians, banks, and credit unions with just-in-time retrieval; and document storage and security services. 12/31/2009 U.S. Data Trust Corp. 12/4/2009 PINS, Online Backup Services - VaultLogix, LLC U.S. Data Trust Corp. provides online server backup solutions for small to mid-sized businesses and companies, as well as remote offices of larger enterprises in the United States, Canada, Mexico, and the United Kingdom. The company s online backup service integrates online server backup, offsite storage, archiving, and recovery. It also offers LiveVault Web management portal, a Web account for backup and restore functions. - Backup-Connect International B.V. B.V. Online backup activities of PINS offer online backup services. PINS is based in Amsterdam, Netherlands. 8/3/2009 DocSafe - Backup-Connect International B.V. DocSafe provides online backup services to the healthcare companies. The company is based in Eindhoven, the Netherlands. 7/10/2009 Steek S.A F-Secure Oyj (HLSE:FSC1V) Steek S.A. develops online data management products for the individual consumers and SMEs. The company provides online storage software to telecomm operators. 10/22/2008 Slicehost, LLC and Jungle Disk, Inc. 28 Rackspace Hosting, Inc (NYSE:RAX) Jungle Disk, Inc. provides online storage software and services. Slicehost, LLC and Jungle Disk, Inc. are based in United States. 7/8/2008 Carpathia Hosting, Inc. 6/24/2008 RISC GROUP IT Solutions Ltd. 5/16/2008 ZYB Technologies ApS - Spire Capital Partners, LLC 6.7 RISC Group (ENXTPA:RSC) Carpathia Hosting, Inc. provides enterprise managed hosting services for government agencies and businesses. The company offers dedicated and shared firewall packages, load balancing options, and online backup and recovery solutions; individual colocation rack spaces; rack colocation services. RISC GROUP IT Solutions Ltd. provides data backup and storage solutions. It offers online backup for personal computers and laptops. The company s products also include Online Pro Server Edition, an online backup for servers and networked environments; and OnLine Pro for Macintosh OS X, an offsite data backup for Macs, servers, and network environments Vodafone Europe B.V. Develops phonebook solutions to provide online backup and management services for mobile content to customers in Europe, the Middle East, and Africa. The company backs up and synchronizes the contact information, calendar events, pictures, and text messages on phone to the Internet. 4/30/2008 More Group, Inc., MoreStor Vault Online Backup and Recovery Offering - Vault USA, LLC MoreStor Vault is an automated backup and disaster recovery software which offers encrypted offsite protection, rapid recovery, and enhanced security services to small and medium sized businesses. 4/22/2008 Secured Digital Storage Corp. (OTCPK:SDGS) Operates as a data management and digital storage lifecycle management partner to business and information technology operations. It focuses on providing online backup data storage solutions for critical data to businesses, law firms, government agencies, and the healthcare industry. 11/30/2007 Datascape Online Limited - - Datascape Online Limited provides remote data backup services. It offers d stor online backup service, a managed solution for backing up and recovering data; i-stor(business), a PC and laptop backup service that allows to backup business information held on personal computers and laptops; and i-stor (home), which automatically back up computer data to a secure off-site location. Sources: Capital IQ, Venturewire, Redwood Capital 7

8 VENTURE FUNDING Investment activity in the online backup, storage and content management areas has been rather active over the past several years, despite a slow venture investment climate. In reviewing some of the minority investments below, it is evident that there are a wide range of players active in building out their businesses including traditional venture backed players (Carbonite and Ocarina), as well as small cap players (digitiliti, SpareBackup) that have completed small fundraises. Perhaps most interesting to note in reviewing the list below, is the diverse range of business models, with some players targeting specific verticals like healthcare or financial services, some going direct while others focus on resellers, and most of course targeting SME s. In addition to the fundraising by smaller players shown below, many larger strategic players have also made investments in building their own internal offerings given the importance and opportunity presented by online storage. With all this investment and activity and a maturing of the market, we suspect that investments for early stage players is probably winding down with further investment activity focused on growth and expansion for the emerging leaders as well as some acquisition funding to drive consolidation as the cost to acquire new customers increases, making acquisitions a more compelling means of growth. Finally, we suspect some leaders to also raise funding to invest in broadening their solution offering from simply storage and backup to incorporate greater content management functionality or tailor their solutions specific verticals. Selected Venture Investments Present ($ in millions) Date Ann Target/Issuer 09/20/2010 digitiliti, Inc. (OTCPK:DIGI) T r Amount ainvested Buyers/Investors Announced Digitiliti, Inc. provides data protection solutions to the small to medium businesses and enterprise markets in the United States. The company offers DigiBAK services, which include online backup and recovery services that would backup and restore data on various machines in a network, including desktops, laptops, and file and print servers. 06/04/2010 Tilana Systems Corporation 05/17/2010 Newline Software, Inc. Announced- - Tilana Systems Corporation provides software as a service based online storage solutions to business and consumer PC users. It offers Tilana Reserve, a software utility and off-site data storage service that provides transparent file protection and synchronization of data; Tilana RealCDP, a backup, sync, and archive system that enables Windows servers as cloud based data center servers; and Tilana Client, which syncs, protects, and archives various content. Announced Newline Software, Inc. develops an online backup and restore software solution for individual and business customers. It offers Newline Exact, a cloud-based backup and restore service. Newline Software, Inc. was founded in 2008 and is based in Redmond, Washington. 03/25/2010 IASO International Holding BV Closed - Main Capital Partners BV IASO International Holding BV, through its subsidiary, provides online backup services. The company is based in Emmeloord, the Netherlands. 02/23/2010 Spare Backup, Inc. (OTCBB:SPBU) Announced Spare Backup, Inc. engages in the development and marketing of online backup solutions software and services to individuals, business professionals, small office and home office companies. Its products include Spare Backup, an automated remote-backup solution, which is designed and developed for the small office or home environment to back up data on laptop or desktop computers; and Spare Switch software that enables users to complete the transfer of personal files from one personal computer to another via a high speed Internet connection. 12/24/2009 Carbonite, Inc. Effective20.0 Menlo Ventures; CrossLink Capital, Inc.; CommonAngels; Performance Equity Mgmt Carbonite, Inc. provides online backup services to consumers and small business customers in the United States and internationally. It backs up user-generated content, such as photos, documents, and music on computers. The company was founded in 2005 and is based in Boston, Massachusetts. 8 Sources: Capital IQ, Venturewire, Issuer press releases

9 Selected Venture Investments Present ($ in millions) Date Ann Target/Issuer T r Amount ainvested Buyers/Investors 12/21/2009 VaultLogix, LLC Closed - WestView Capital Partners; London Bay Capital VaultLogix, LLC provides online backup, storage, and disaster recovery services. The company also offers solutions for the support, billing, marketing, and integration of online backup for VAR s, managed service providers, and information technology consultants. 11/25/2009 digitiliti, Inc. (OTCPK:DIGI) 11/23/2009 Ocarina Networks, Inc. Announced Digitiliti, Inc. provides data protection solutions to the small to medium businesses and enterprise markets in the United States. The company offers DigiBAK services, which include online backup and recovery services that would backup and restore data on various machines in a network, including desktops, laptops, and file and print servers. It also provides DigiLIBE, an information management software tool that moves and manages information objects, which are human recognized content, such as a word document or an excel spreadsheet. Effective3.0 - Ocarina Networks, Inc. provides online storage optimization solutions. The company s ECOsystem technology deploys de-dupe and compression algorithms for extracting, correlating, and optimizing data. Its products include Optimizers, data storage optimization appliances; ECOreader, a software layer for reading optimized files on storage systems; and ECOvault, a hyper-compressed archival solution. 10/19/2009 Zecter, Inc. Closed 1.5 Sherpalo Ventures; Tandem Entrepreneurs Management Services, LLC. Zecter, Inc. develops a technology solution for people to access and store content. It offers ZumoDrive, which connects consumers to their content in various devices; and ZumoCast, a service that lets user enjoy personal video collection at home or on-the-go through applications on the ipad and iphone, and a Web browser on any computer. The company s ZumoDrive allows users to access various media collections, such as music, photos, videos, and documents on a computer or a smartphone, as well as provides online backup, sharing, and Web access. 09/21/2009 Spare Backup, Inc. (OTCBB:SPBU) 09/15/2009 MMRGlobal, Inc. (OTCBB:MMRF) 05/21/2009 digitiliti, Inc. (OTCPK:DIGI) Announced Spare Backup, Inc. engages in the development and marketing of online backup solutions software and services to individuals, business professionals, small office and home office companies, and small to medium sized businesses in the United States and Europe. Its products include Spare Backup, an automated remote-backup solution, which is designed and developed for the small office or home environment to back up data on laptop or desktop computers; and Spare Switch software that enables users to complete the transfer of personal files from one personal computer to another via a high speed Internet connection. Announced 10.0 Dutchess Capital Management, LLC Effective MMRGlobal, Inc. provides a suite of online personal health records (PHRs) and electronic safe deposit box storage solutions for consumers, healthcare professionals, employers, insurance companies, unions and professional organizations, and affinity groups in the United States. Its solutions enable individuals and families to access their medical records and other documents, such as birth certificates, passports, insurance policies, and wills using the Internet. Digitiliti, Inc. provides data protection solutions to the small to medium businesses and enterprise markets in the United States. The company offers DigiBAK services, which include online backup and recovery services that would backup and restore data on various machines in a network, including desktops, laptops, and file and print servers. It also provides DigiLIBE, an information management software tool that moves and manages information objects, which are human recognized content, such as a word document or an excel spreadsheet. 02/25/2009 Ocarina Networks, Inc. Closed20.0 Highland Capital Partners; Kleiner, Perkins, Caufield & Byers; JAFCO Ventures Ocarina Networks, Inc. provides online storage optimization solutions. The company s ECOsystem technology deploys de-dupe and compression algorithms for extracting, correlating, and optimizing data. Its products include Optimizers, data storage optimization appliances; ECOreader, a software layer for reading optimized files on storage systems; and ECOvault, a hyper-compressed archival solution. 02/05/2009 Datascape Online Limited Closed - YFM Private Equity Datascape Online Limited provides remote data backup services. It offers d stor online backup service, a managed solution for backing up and recovering data; i-stor(business), a PC and laptop backup service that allows to backup business information held on personal computers and laptops; and i-stor (home), which automatically back up computer data to a secure off-site location over the Internet. Sources: Capital IQ, Venturewire, Issuer press releases 9

10 Date Ann Target/Issuer 01/06/2009 CTERA Networks, Ltd. T r Amount Selected Venture Investments Present ainvested Buyers/Investors 09/08/2008 Carbonite, Inc. Closed20.0 3i Group plc (LSE:III); Menlo Ventures; CommonAngels; Performance Equity Management LLC Closed - Benchmark Capital CTERA Networks, Ltd. offers storage and backup products. Its products include a plug-top computing device for file sharing, data backup, and synchronization; a Cloud Attached Storage appliance, which supports two internal hot-swap SATA drives to connect additional external drives; and a plug computing device that transforms USB or esata hard drives into network-attached storage with integrated online backup for small offices and high-demand consumers. Carbonite, Inc. provides online backup services to consumers and small business customers in the United States and internationally. It backs up user-generated content, such as photos, documents, and music on computers. The company was founded in 2005 and is based in Boston, Massachusetts. 07/09/2008 efilecabinet, Inc. Closed 1.0 Canopy Group efilecabinet, Inc. offers a suite of electronic document management and online backup products and services. The company offers Concentsus Online Backup, a service for home, small business, and enterprise users to store their data in a secure and remote location; SecureDrawer, a Webbased client portal service that enables users to share files via an online repository; and document scanners. 07/03/2008 Novavisions AG (XTRA:MONT) Closed /01/2008 Steek S.A. Closed7.88 Innovacom; IDInvest Partners 06/18/2008 Parascale, Inc. Closed11.37 Charles River Ventures; Menlo Ventures Novavisions AG provides software solutions for data availability and protection primarily in Germany and the United States. It offers software, SaaS solutions, and services for local and online backup, restore, and retention of business-critical data. The companyâ s products include NovaNET WEB, an online backup solution for various businesses; NovaBACKUP for smaller businesses and end users, ; HiFreezer, a system for long-term storage of data in compliance with legal regulations; and HiBack ixt, a product that provides central backup and restoration management for sites. Steek S.A. develops online data management products for the individual consumers and small and medium-sized businesses. The company provides online storage software to telecommunications operators. It also offers SteekR that provide a path to multi-device/media convergence to store, access, share, and run multimedia and data files with online hard drive; and SteekUP, which automatically backs up data in a secured vault through an encrypted online connection. Parascale, Inc. develops and sells cloud software for servers. It offers The Parascale Cloud Storage (PCS), a software-only solution to create, manage, and power cloud storage. The company also provides video-on-demand, document archive, online backup, and video surveillance solutions. Parascale, Inc. was founded in 2004 and is based in Cupertino, California. 04/01/2008 Spare Backup, Inc. (OTCBB:SPBU) Closed Spare Backup, Inc. provides online backup solutions software and services. Its products include Spare Backup, an automated remote-backup solution, which is designed and developed for the small office or home environment to back up data on laptop or desktop computers; and Spare Switch software that enables users to complete the transfer of personal files from one personal computer to another via a high speed Internet connection. Sources: Capital IQ, Venturewire, Issuer press releases 10

11 Storage & Backup / Recovery Business Overview Provides backup, recovery and security solutions for physical, virtual and cloud environments. Acronis patented disk imaging technology enables corporations, SMBs and consumers to protect their digital assets. Acronis software is sold in more than 180 countries and available in 13 languages. Product Overview Acronis Backup & Recovery 10: designed to provide centralized management of all workstation and server backup and disaster recovery activities in Windows and Linux environments to help organizations of all sizes meet challenging Recovery Time Objectives (RTOs). The solution also includes physical and virtual platforms. Acronis Online Backup: a subscription-based service to protect household digital information, as well as technical consulting. The home product suites enable centralized remote operation, consolidated backup integration, image encryption, server consolidation, virtualization migration, and data management services. Acronis True Image Home 2011: Backup and Recovery software Acronis Disk Director 11 Home: Security and Disk Management software Customers Businesss and home users Headquarters: Woburn, MA Offices: additional offices in the United States, Singapore, Hong Kong, Malaysia, China, Taiwan, Korea, Japan, Australia, Belgium, Italy, Germany, France, Spain, the United Kingdom, the Russian Federation, Sweden, and Switzerland Founded: 2000 URL: Management and Board Key Executives Jason Donahue, CEO Laurent Dedenis, Executive VP Key Board Members Ilya Zubarev, Chairman Serguei Beloussov, Founder and Director Ownership and Investment Investors ABRT Venture Fund Insight Venture Partners OpenView Venture Partners Recent Key Events 12/03/10 Acronis named 2010 Editors Best and Community Choice Award Winner by Windows IT Pro Magazine 11/3/10 Redmond Magazine Readers Select Acronis as Best Backup and Recovery in 2010 Readers Choice Awards 10/28/10 Inc. Magazine Unveils Its Fourth Annual Exclusive List of America s Fastest-Growing Private Companies the Inc /21/10 Acronis Ranked Number 219 Fastest-Growing Company in North America on Deloitte s 2010 Technology Fast /19/10 Acronis Presents Acronis True Image Home 2011 For Netbooks 10/14/10 Acronis Launches Two Disk Management Products (Disk Director 11 Home) Designed for Business Environments 10/6/10 Acronis Migration Tools Now Offered With Intel Solid-State Drives 11

12 Storage & Backup / Recovery Business Overview Online file storage, sharing, and collaboration solutions to registered users in the United States and internationally. Product Overview Document Management: an online, virtual server to which you can upload, access, organize and edit your documents and media files, as well as share files securely. Offers the ability to preview most standard files online within Box, using integrated services from Google, Zoho, Scribd and others. Project Management: a virtual workspace which facilitates interactions between workers in distinct locations. Box s Business edition also provides tools to monitor and manage activity across all the users in the Box account. Managed File Transfer: the ability to share documents and media content with colleagues and external partners FTP Replacement: a means of simplified file sharing in which users can create and organize multiple layers of folders for all content, share files and folders with a simple weblink, store productivity documents, PDFs, images, audio and video files, up to 2GB each for Business and Enterprise customers, and control who can access files and folders, and for how long. Managed File Transfer: an ability to monitor and manage activity across all users in the Box account. Data Rooms: a secure virtual data room, separate from all content, with multiple layers of protection. Online File System: an online system which allows users to upload, access and manage files from any browser. Customers The company serves individuals, small businesses, schools, and other organizations. Over 60,000 businesses rely on Box.net daily. AARP, Bio Rad, ClearChannel, Cleveland Golf, Coach, Columbia University, Dell, DirectTV, ESPN, Eveo, Giants, InCase, Kiehls, Life- Touch, LinkedIn, Lord & Taylor, MTV, Nokia Siemens Networks, Panasonic, Publicis, Saatchi & Saatchi, Skype, TaylorMade, Headquarters: Palo Alto, CA Founded: 2005 URL: Management and Board Key Executives Aaron Levie, Co-Founder and CEO Dylan Smith, Co-Founder and CFO Key Board Members Josh Stein, Director Ownership and Investment Date Value ($m) Investors 4/ Draper Fisher Jurvetson; Scale Venture Partners; U.S. Venture 10/ Draper Fisher Jurvetson; U.S. Venture 1/ Draper Fisher Jurvetson; U.S. Venture 10/ Draper Fisher Jurvetson Recent Key Events 12/15/10 Box.net Named to Inc. Magazine s Breakout Companies of /14/10 Box.net Closes Record Quarter with 500% Increase in Enterprise Deals 9/23/10 Box.net Expands Mobile Platform with App for Android 8/31/10 Box.net Ranks No. 152 on the 2010 Inc. 500 with Three-Year Sales Growth of 1,822% 7/8/10 Box.net Triples Enterprise Revenue in H /10/10 Box.net Connects the Desktop to Cloud Content Management with Box Sync for Business 4/15/10 Box.net Integrates With Netsuite s Cloud Computing Platform 12

13 Storage & Backup / Recovery Business Overview Provides online backup services for user-generated documents and media files. Since inception, Carbonite has backed up over 69 billion files. Today the company backs up more than 150 million files every day. Moreover, Carbonite has restored over 6.1 billion files that otherwise would have been lost. Product Overview Carbonite 4.0: an online back up service which includes Restore Manager, an interface that guides users through the restore process. Carbonite 4.0 also includes file versioning and a migration wizard. Carbonite 4.0 is complete with Remote File Access, which allows the user to securely access the files in the backup system from any computer connected to the Internet. In addition to the Windows client, the company provides clients for the ipad/iphone/ipod Touch, Blackberry, Mac, and now Android phones. There's also Web access so you can download a file from virtually anywhere. Customers Provides services to consumers and small business customers Partners Acer, iyogi, SunMicrosystems Headquarters: Boston, MA Founded: 2004 URL: Management and Board Key Executives David Friend, Co-Founder, Chairman and CEO Jeff Flowers, Co-Founder and CTO Andrew Kennan, CFO Key Board Members William G. Nelson, Director Date Ownership and Investment Value ($m) Investors 12/ CommonAngels; CrossLink Capital; Menlo Ventures; Performance Equity 9/ i; CommonAngels; Menlo Ventures; Performance Equity 5/ i; CommonAngels; Menlo Ventures 2/ i; CommonAngels; Keiretsu Recent Key Events Carbonite Launches Android Application for Quick and Easy File Access Carbonite Wins Mass Tech Leadership Council Private Company of the Year Carbonite VP Swami Kumaresan Named Boston Business Journal 40 Under 40 Honoree Carbonite Named Finalist in Three Categories in 2010 Mass Technology Leadership Awards Program Carbonite Releases Version 4.0 with Upgraded Backup and Restore Features Carbonite Ranks No. 9 on the 2010 Inc. 500 With Three-Year Sales Growth of 11,207% Carbonite CEO David Friend Named Ernst & Young Entrepreneur of the Year 2010 in New England 13

14 Storage & Backup / Recovery Business Overview Provides a suite of Enterprise Content Management (ECM) products and services through a subscription-based pricing model. Product Overview efilecabinet: an Electronic Document Management (EDM) solution to store and manage important business documents. The software provides document level indexing and full text search, document retention, purge, copy or archive files and file versioning to track the life span of documents. Secure Drawer: a Web-based client portal/file sharing service to share and collaborate, which utilizes the SaaS model. The portal is complete with tracking notification, file encryption and document scanners. Concentus: a backup system to protect documents via a secure, online repository. The solution offers a 256-bit SSL Encryption, 448-bit Blowfish Encryption as well as Private Encryption options. Customers More than 22,000 users worldwide The company serves various industries, including accounting, banking, education, e-recording, government, human resources, insurance and financial services, legal, medical, mortgage, mortuary/cemetery, and special districts. Partners Aries, CMIT Solutions, DirectPointe, Grupo Instrucontrol, ScheduleView.com, Simplifile, Zumasys, Headquarters: Provo, UT Founded: 2001 URL: Management and Board Key Executives Matt Peterson, CEO and President Craig Jensen, VP of Worldwide Sales Rourke Mace, VP of Business Development Ownership and Investment Date Value ($m) Investors 7/ Canopy Group Key Board Members James Blaylock, Founder and Chairman Recent Key Events 11/23/10 efilecabinet Releases Enhanced Version 2.0 of SecureDrawer 10/14/10 efilecabinet Forms Partnership with National Association of Tax Professionals 9/15/10 efilecabinet Upgrades EDM Suite with Version 5.0 8/11/10 Plustek Announces Partnership with efilecabinet 8/03/10 efilecabinet Continues Expansion of International Reseller Network 4/20/10 efilecabinet and DirectPoint Announce Strategic Relationship 3/1/10 efilecabinet Launches SecureDrawer 14

15 Storage & Backup / Recovery Business Overview Provides business-class online information technology infrastructure solutions and services including file storage, backup, sharing and collaboration. Product Overview Egnyte Cloud File Server: addresses the critical infrastructure needs of businesses file storage, backup, sharing and collaboration in one secure, centrally-managed and easy-to-use solution. In combination with its Local Cloud technology, Egnyte enables fast local edit capabilities and offline access to files. Egnyte is a business-class online solution that completely eliminates the costs and complexity of purchasing and maintaining traditional file servers, tape backups, FTP and VPN systems. Files can be accessed from a PC, Mac or mobile device, providing unprecedented access control which can be administered from anywhere on the Internet. Customers American Liver Foundation, Arizona State University, Bauer, BET Networks, Bulova, Cisco, Crayola, HD Envy, Fender, Ghiardelli, IKEA, Intel, Lexmark, Lincoln Financial Group, Merry Maids, Metal Museum, Natural Balance, Nike, Sears, WayPoint, Yamaha Partners NETGEAR, VMware Headquarters: Mountain View, CA Offices: The company serves real estate, financial services, and healthcare sectors. Founded: 2006 URL: Management and Board Key Executives Vineet K. Jain, Co-Founder and CEO Rajesh Ramakrishnan, Co-Founder and Product Management Filip Kesler, Business Development Key Board Members Mike Maples, Director Ownership and Investment Date Value ($m) Investors 7/ FLOODGATE; Polaris Venture 7/08 - FLOODGATE Recent Key Events Egnyte Beats Box.net in Large Data Upload Speeds; Surpasses Five Billion Files Stored Egnyte Selected as Finalist in GigaOM Net:Work 2010 Future Ideas Contest Egnyte and NETGEAR Partner on Cloud Services New Capabilities Make Cloud Storage Enterprise Ready-Delivering Professional Look and Feel while Maintaining Corporate Identity and Leveraging Existing IT Investments Egnyte CEO Named 2010 Storage Superstar and Chosen 2010 Emerging Storage Vendor by CRN Magazine Egnyte Expands its Hybrid Cloud Storage Solution to Popular Network Attached Storage Devices 15

16 Storage & Backup / Recovery Business Overview Provides SaaS-based data backup and recovery solution for managed service providers. Intronis utilizes 256-bit AES security and multiple data centers located on opposite coasts to ensure data protection and availability. Intronis offers IT service providers a secure data solution combined with a robust partner program and the convenience of online account management. SAS 70 Certification Product Overview Backup Software: built for managed service providers, the backup system offers block-level backup, Microsoft Exchange support, retention and archiving, continuous data protection, a local repository, as well as mapped drive support. Partner Portal: an management and administrative tool which provides reporting capabilities, billing management and marketing resources. Branding: the ability to recast the Intronis software with a customer s company logo including rebranding of technical documentation, HIPAA information, and marketing collateral that can be utilized when consulting clients. Partners Advantage Technologies, BEL Network Integration & Support, InfoBit Systems, Island Technologies, Moebius Technologies, Now IT Works, Pact One, Relion Computer Service Integration Partners: ConnectWise, Kaseya, Level Platforms, N-able Headquarters: Boston, MA Founded: 2003 URL: Management and Board Key Executives Kent Plunkett, CEO Steven Frank, Co-Founder and VP of Architecture Denice Sakakeeny-Smith, Director of Finance Ownership and Investment Date Value ($m) Investors 10/ OpenView Venture Partners Key Board Member Samuel Gutmann, Co-Founder and Chairman Recent Key Events Intronis Wins Best of Show at ASCII Boston Success Summit Intronis Executives Named to MSPmentor 250 List Intronis Launches Local Backup and New Reporting Tools for Managed Service Providers Intronis Sponsors the VAR Guy Live 2010 Webcast Series Intronis Eric Webster Recognized as a 2010 Channel Chief by Everything Channel s CRN Intronis Teams Up with HTG Peer Groups to Drive Technology Reseller Success Intronis Introduces New Partner Portal 16

17 Storage & Backup / Recovery Business Overview Provides online backup, storage, and disaster recovery services. The company also offers solutions for the support, billing, marketing, and integration of online backup for VAR s, managed service providers, and information technology consultants. Product Overview Internet Vault Business Solutions: an automated online backup solution provides off-site transmission and storage, while under the protection of industrial-strength encryption. Instant access to data allows quick and easy recovery. VaultLogix online backup makes compliance much easier given automation in moving the data off-site, audit trails, encryption, preservation of all iterations of documents and built-in redundancy. Integrated Local Vault: Using the Local Vault, data saved locally does not have to be stored offsite. The Local Vault solution facilitates business disaster restoration by saving multiple copies of selected backup sets on a local disk share located on the LAN. If a restore is needed, the file can be quickly restored from the local environment, at LAN speed, without connecting through the Internet to VaultLogix. Secure Online Backup Customers The company serves government institutions, construction, design, education, finance and medical professionals, hospitality, legal service professionals, insurance, manufacturers, real estate, religious organizations, and retail clients. Headquarters: Danvers, MA Offices: Founded: 2003 URL: Management and Board Key Executives Tim Hannibal, Founder and CEO Dan Sullivan, CFO Zak Karsan, VP of Business Development Key Board Members Jeff Danos, Director Ownership and Investment Date Value ($m) Investors 12/09 - London Bay Capital; WestView Capital Partners Recent Key Events VaultLogix Announces Availability of Online Backup Solution Through Cloud Services Depot VaultLogix Online Backup Service Protecting Over 350TB in 20 Countries Across 6 Continents VaultLogix Online Backup Service Added to General Service Administration Schedule 70 to provide services to the U.S. Gov VaultLogix Consolidates Operations of U.S. Data Trust and Data Protection Services under VaultLogix Name VaultLogix Announces Integration of Online Backup solution with Autotask Professional Services Automation Software VaultLogix Integrates Online Backup and Recovery Solution with Nimsoft 17

18 Redwood Capital Group is an investment banking firm serving the technology, communications and media & business services industries. The firm focuses on mergers & acquisitions, debt and equity financings, and financial advisory services for its clients worldwide. United States 885 Third Avenue 25th Floor New York, NY Telephone: Fax: United Kingdom The Cobalt Building Noel Street London W1F 8GW Telephone: +44 (0) Fax: +44 (0) Copyright 2009 Redwood Capital Group LLC. This report is published solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy any security. The information herein is based on sources we believe to be reliable but is not guaranteed by us and we assume no liability for its use. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice. 18