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June 27, 2011

Not All Roads to the Public Markets Are Smooth Ones

In Silicon Valley, we fall in love with and memorialize success stories. Leaders of successful companies can be seen as pop culture heroes, and their decisions during times of challenge or opportunity can be told and retold as legend. The first years of companies like Apple, Microsoft, Sun, and Oracle in one era, Netscape and Yahoo! in another, Google and LinkedIn in a third, and in today's evolving present history, including Facebook, Foursquare, Groupon and more, are possibly going to be reviewed and dissected in the same way we look back on innovations from the turn of the 20th century with the assembly line, and the Industrial Revolution in centuries past.

The opportunity to grow fast, get big and get rich drives many people to flock here and try their own hand at catapulting an idea into a passion that could see millions or tens of millions of users. But, if nine of ten startups fail, for every big name I just mentioned, there are carcasses of many others that never make it. And for every rocketship IPO that has people clamoring for updates, there are others that take a longer path. (See all of the S-1 filings on the SEC)

Friday saw the second filing of an S-1 by BlueArc, my employer from early 2001 to Spring of 2009. The company is looking to raise $100 million by entering the public markets on the heels of rising revenue and reduced losses. I know the story well as I helped author the first version of this same document when we filed to go public in 2007 and was there when we withdrew the filing in 2008.

(You can safely assume I own shares, though not a significant number, and it's in my best interest if they do eventually go public. Given the company's sensitive position, I'm reticent to mention particulars, so this article is painted with a broad brush, and is as neutral as possible. Rather than ignore the news, I'm offering the filing as an example of a company that has not seen overnight success.)

The company was founded in the late 1990s, and raised more than $200 million, the most recent round completed last fall. In my time there, we signed some amazing customers, got some powerful OEM and reseller deals, and sold to new territories. We learned where our products were a great fit, and where we had challenges. We hired lots of great people, and saw others struggle. CEOs were changed a few times. We had layoffs a few times. The company and its customers made the front page of trade magazines and the business sections of the New York Times and Wall Street Journal. Other times, rumors flew about the company's viability. At one point, the noise got so bad, a leading industry analyst wrote an entire column about how he'd heard so many rumors on the company, fed by tough competitors, that he recommended anybody hearing such rumors to just ignore them.

The result of a company that has a few years under its belt, with many funding rounds, some happy investors and some unhappy, some happy employees, and some unhappy former employees, is a body of work that tells a story. For financial junkies and tech watchers, or just the curious, poring over the details of BlueArc's S-1 is interesting. There are no funny numbers like those from Groupon, who quite visibly took money off the table for its founders and key employees. There is no meteoric financial windfall like those seen at Google and assumed at Facebook. Just a growing, challenging, business in a tough market that has seen competitors purchased by industry heavyweights for billions of dollars and others, failing, just go out of business or sold for scrap.

While most of the tech press is enamored with consumer Internet plays and mobile apps, the enterprise market has its own unfair share of intrigue - often harder to grok, but just as aggressive. The South Bay especially, the world of Milpitas and San Jose, is dotted with networking firms, semiconductor firms, storage and switching companies in the shadows of NetApp and Cisco. Having lived that world for most of the last decade, coming from the position of a challenger with unique technology, I'm hoping that the colleagues of mine still at the company find a positive exit for the decade-plus some have put into the effort, or lesser tenures for the more recent arrivals. But for those of us who seem to have attention deficit disorder when it comes to watching companies start and flourish, or to our own job-hopping resumes, this is an interesting case study of one company that didn't take the easy route.

Disclosures: I was employed in the Marketing department at BlueArc from 2001 to 2009 and own a small amount of the company's common stock.