Is I/O the New Cloud?

I had meant to call Barry Eggers for the usual chat about his latest exit. His firm, Lightspeed Venture Partners, was the largest shareholder in Pliant Technology, a four-year-old developer of enterprise storage devices that sold a few days ago to SanDisk for $327 million plus equity incentives.

That sort of deal didn’t get a lot of ink this week, given that it’s not a social networking company and it’s valued in the mere hundreds of millions, rather than billions. It also doesn’t help that flash memory in the data center isn’t exactly exciting fodder for cocktail party conversation.

But nonetheless, it looks like Pliant, which says its flash-based devices offer “breakthrough improvements for a range of data I/O intensive enterprise applications”  is on the leading edge of a hot area for exits, outsized funding rounds, and general buzzword proliferation.

What are the indicators? First, there’s the idea that while one deal may be an exception, several marks a trend. In addition to Pliant, another company that’s all about I/O (an abbreviation for input/output, usually related to drawing data from storage), the aptly named Fusion-io, looks poised to generate some serious returns. The company, which raised a weighty $115 million over the past three years from VCs, said in its initial filing that it’s seeking to raise $150 million.

Fusion-io’s claim to fame is a pioneering “next generation storage memory platform for data decentralization.” As my data center experience consists of a single visit to one for a story ten years ago, I must confess to lacking the expertise to explain precisely why it’s so pioneering. But whenever lately I ask someone who invested, they get this kind of glassy, excited look in their eyes, tell me it’s revolutionary, and then apologize for not being able to go into more detail due to quiet period restrictions. Plus they signed up Steve Wozniak as their chief scientist in 2008, which is sort of the geek-chic cache equivalent of getting a rock star to play guitar for your garage band.

It also helps that their revenue growth is phenomenal. Fusion-io posted sales of $125 million for the ninth month period ending in March, up from $25 million in the same period a year ago. Unprofitable a year ago, it’s now running at almost break-even, even after doubling sales and marketing spending and ramping up R&D.

But I asked Eggers: What’s with the I/O tag? Seems like it’s in everyone’s startup business plan. And Google just added more fuel to the buzzword fire with its Google I/O developers conference that wrapped up last week.

“Generally, people use it as a proxy for performance,” says Eggers. “You see a lot of companies have I/O in their name, and it’s got good branding, but it could get overused like cloud has.”

For Lightspeed (the second-largest venture in Fusion-io, after NEA) there’s a lot riding on its bet that demand for and innovation around faster data retrieval, particularly through flash memory technology, will keep gaining traction. Although it made a “very healthy venture return” on Pliant, Eggers says, the firm still has bets on the table for several other companies tied to that trend. One is Nimble Storage, which seems to be a developer of hybrid systems that combine flash with high capacity disk in a way that apparently offers cheaper backup and recovery. Another is IO Turbine, which focuses on input/output bottleneck issues by using flash technology directly in VMware server environments.

Looking at that last business description, artfully written for the Thomson Reuters funding database, I think I can understand why I/O is an ascending buzzword. I just had an image of trying to explain to my mother what “using flash technology directly in VMware server environments” means.

So much easier to say: They’re an I/O company.