Venture Funding's Vanishing Act

VCs insist they still have high hopes for data-storage startups, but their shrinking investments testify to a mood of extreme caution

Entrepreneur Phil Soran was stunned this year at how much cajoling and convincing it took to obtain funding for his new data-storage venture, Compellent Technologies. After all, Soran was one of the founders of XIOtech, a storage-networking pioneer, which Seagate bought in January, 2000, for $360 million. He expected venture capitalists to line up for a piece of his new company, partly because he believed his startup was built on a good idea and also because "we had made a lot of VCs a lot of money," he says. "We thought that would carry the day."

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