Nutanix Raising $101 Million May Hold Share Sale by Year-End

Nutanix Inc., a maker of software and hardware for data centers, closed a $101 million funding round today, a move that could lead to a share sale as soon as the end of 2014, said Chief Executive Officer Dheeraj Pandey.

The fundraising, which was co-led by Riverwood Capital and SAP Ventures, values the company at about $1 billion, Pandey said in an interview. Other investors in the round included Morgan Stanley Expansion Capital and Greenspring Associates, the company said in a statement.

“This could be a very large IPO, much larger than we’ve seen from infrastructure companies in the last 10 years,” Pandey said.

Nutanix is among companies including SimpliVity Corp. and Scale Computing that are taking on established storage, server and networking vendors ranging from International Business Machines Corp. to EMC Corp. While most traditional data-center hardware serves specific functions and often stands idle, Nutanix’s gear has software that enables it to perform multiple tasks, ranging from computing to storage and networking.

To date, San Jose, California-based Nutanix has raised a total of $172.2 million. The new investment will be used to expand the company’s sales force and customer service worldwide, as well as to further develop its products -- laying the groundwork to increase sales and an initial public offering, Pandey said in the interview.

‘Lower Multiple’

“The funding round that we did is at a significantly lower multiple than what you would find for a comparable company in the public market,” Jeff Parks, a partner at Riverwood Capital, said in an interview. “I think the valuation we are in is a pretty small number relative to opportunity.”

Parks was named to Nutanix’s board, as was Mike Scarpelli, chief financial officer of ServiceNow Inc., the company said.

Nutanix hasn’t yet chosen its bankers for a share sale, Pandey said. An IPO could take place in the last quarter of 2014 or in the first quarter of 2015, he said.

The company can provide its hardware and software in individual boxes. When a box reaches capacity, customers such as EBay Inc. and the U.S. Army can add another box in 30 minutes.

Richard Fichera, an analyst at market consultant Forrester Research Inc., says single-box sales account for less than 1 percent of the data-center server and storage hardware market that is valued at more than $40 billion. He estimates that will rise to as much as 20 percent in five years.

Attracting Attention

While it began with serving smaller businesses, Nutanix is increasingly attracting attention of larger companies, Pandey said. The company, which is not profitable, has been growing revenue by 30 percent to 40 percent quarter-on-quarter and has passed $100 million in lifetime sales, he said.

“It’s one of the fastest growing companies we’ve ever seen in our careers,” Jai Das, a managing director at investor SAP Ventures, said in an interview.

While Nutanix doesn’t currently have a business relationship with SAP, “that’s possible,” Das said, adding that SAP software could be optimized to run on Nutanix boxes.

In the next 12 to 15 months, Nutanix, which has about 400 employees, plans to double its sales force, with increases in the U.S. and overseas markets such as the U.K. and the Netherlands, Pandey said. To help large global customers, it will also double the number of its support staff in the next 12 to 18 months, he said.

“One of the goals is to put as many feet on the ground as we can,” Pandey said. “Growth of sales and marketing is a pretty big part of it.”

Lightspeed Venture Partners, Khosla Ventures and Battery Ventures also invested in the funding round. GS Direct LLC, an investment vehicle affiliated with Goldman Sachs Group Inc., has previously invested in the company.

Nutanix also secured a line of credit of up to $55 million, the company said today.

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